DraftKings (NASDAQ:DKNG), BetMGM (co-owned by MGM Resorts (NYSE:MGM) and Entain Plc (GB:ENT)), Flutter Entertainment’s FanDuel, and Caesars Entertainment (NASDAQ:CZR) are expected to benefit from the record bets on this weekend’s Super Bowl game between the Philadelphia Eagles and the Kansas City Chiefs, as several states across the U.S. have legalized sports betting.
The Super Bowl LVII, to be held in Glendale, Arizona, will be the first National Football League (NFL) championship to be played in a state that has legalized sports betting. Trade group American Gaming Association (AGA) projects that the number of American adults expected to bet on Super Bowl LVII could increase 61% to 50.4 million. Furthermore, bets worth $16 billion are expected to be placed on Sunday’s Super Bowl, which is more than double last year’s estimate of $7.6 billion.
Expansion of Legal Sports Betting
AGA’s estimates are based on a survey of about 2,200 American adults. The survey further reveals that about 30 million (up 66% from last year) Americans plan to place sports wagers online, in person at a retail sportsbook, or with illegal bookies. Meanwhile, 28 million Americans (up 50% from last year) intend to bet casually with friends or through pools and contests.
Additionally, the AGA survey revealed that about 34% of NFL fans feel that the expansion of legal sports betting has made “watching an NFL game more exciting.” Currently, sports betting is legal in 33 states and Washington, D.C., with three additional legal markets awaiting launch.
AGA President and CEO Bill Miller stated, “Every year, the Super Bowl serves to highlight the benefits of legal sports betting: bettors are transitioning to the protections of the regulated market, leagues and sports media are seeing increased engagement, and legal operators are driving needed tax revenue to states across the country.”
While AGA’s $16 billion estimate seems encouraging, it includes a substantial amount of illegal bets. PlayUSA, a website that covers legalized gambling, estimates that legal sportsbooks across the U.S. could see bets worth more than $1.1 billion, up from $947 million last year.
Let’s have a look at two stocks that could benefit from a favorable backdrop for legal sports betting.
Is DraftKings a Buy?
Wall Street is cautiously optimistic about DraftKings due to a slowdown in its top-line growth and profitability concerns. The company’s efforts to improve its bottom line and the potential legalization of sports betting in additional states could enhance the company’s position.
The Moderate Buy consensus rating for DraftKings is based on seven Buys, five Holds, and one Sell. The average DKNG stock price target of $17.75 implies that shares could be range bound in the months ahead. Shares have rallied over 55% so far in 2023.
Is MGM Resorts International a Good Stock to Buy?
On Wednesday, MGM Resorts reported upbeat Q4 2022 revenue but a higher-than-anticipated adjusted loss per share. It expects better business in 2023 due to MGM China’s return to profitability and the ongoing improvement at BetMGM.
MGM is gaining from the rapid growth of its BetMGM joint venture. BetMGM is expected to deliver revenue in the range of $1.8 billion to $2 billion in 2023, up from nearly $1.4 billion in 2022.
It is expected to turn EBITDA positive in the second half of 2023. BetMGM claims to be a leader in the iGaming space with a 30% market share. It has a market share of 13% in the online sports betting market.
Wall Street’s Strong Buy consensus rating for MGM Resorts is based on seven Buys and two Holds. At $50.17, the average MGM stock price target suggests 21.1% upside potential. Shares have risen 24% year-to-date.
Super Bowl betting is estimated to reach $16 billion this year, including legal bets and those placed with illegal bookies or casually among friends or relatives. Nonetheless, companies like DraftKings are expected to gain from a rise in the number of U.S. states that have legalized sports betting.