Wall Street Bets is a roundup of recent notes from analysts covering the gambling industry.
Alabama gambling legislation
Analyst David Katz of Jefferies examined the possibility of Alabama legalizing gambling. “HB151, a proposed constitutional amendment that would allow gambling through land-based casinos, a state lottery, and sports betting, passed by 70-32,” Katz wrote in a Feb. 19 note. “HB152 also passed, providing for 10 casinos, four would be operated by the Poarch Band of Creek Indians. Additionally, the bills indicate a $5 million license fee and tax rates on land-based gaming and OSB at 24% and 17%, respectively. If approved by 2/3 of the Senate, the statewide referendum to amend the constitution would take place in November. Note that the governor is supportive, which, historically, increases the likelihood of success.”
DraftKings acquires Jackpocket
DraftKings acquisition of Jackpocket drew the attention of Truist Securities analyst Barry Jonas. In a Feb. 16 note, Jonas wrote that DraftKings recent earnings conference call “provided some clarification on how they’re viewing the Jackpocket (private) acquisition before meaningful contribution in 2026+. Until then, management sees no material impact from Jackpocket in 2024 (if closed in 2H as expected), in the range of low single-digit losses and thus not factoring into DraftKings’ guide. In 2025, management sees positive contribution – DraftKings believes dependent on timing of deal close and synergy realization, it’s more likely the company sees slight EBITDA generation, though more meaningful contribution is on the table. While ilottery legalizations could be threat in our view, we don’t see anything imminent while Jackpot solidifies its brand and builds up its database. This should be amplified under DraftKings’ ownership.
New Jersey sports betting
J. P. Morgan analyst Joseph Greff looked at January sports betting trends in New Jersey. “For the month, sports betting revenues totaled $170.8 million, up 136% year-over-year on handle that was $1.72 billion, up 59%,” Greff wrote in Feb. 16 note. “Aggregate win rate for the month was 9.9%, up 325 basis points year-over-year. In terms of market share for the top four operators, we estimate FanDuel at $107.4 million (63% share), followed by DraftKings at $38.6 million (23% share), BetMGM at $8.0 million (5% share), Caears at $2.1 million (1% share), and Penn/ESPN BET at negative $1.1 million. Recall, ESPN BET ran an Odds Boost on the NFL divisional round provided an arbitrage opportunity for bettors and likely inflated reported handle but reduced reported revenue.
Chinese New Year/Macau
Jefferies’ David Katz also wrote a Feb. 19 update about Chinese New Year (CNY), noting that “data suggests that visitation and hotel occupancy approached 2019 CNY levels, with total arrivals substantially exceeding the Macau government forecast (1.36 million vs. <1 million). Despite expecting the traditional post-holiday slowdown, February gaming revenue is on track to reach a post-pandemic high. Although U.S. and some Asia stocks have posted YTD gains, the China macro concerns continue to leave the stocks range-bound.
