Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Harmonic (HLIT) announced that Bally’s Interactive (BALY) is using Harmonic’s VOS360 Media SaaS for cloud playout and branding. "Leveraging VOS360 SaaS, Bally’s Interactive can deliver premium sports events with low latency and pristine video quality on the Bally Live app," the company said. Harmonic’s VOS360 Media SaaS simplifies all stages of media processing and delivery, providing customers like Bally’s Interactive with an end-to-end, cloud-native solution for playout, branding, media processing, streaming and more. Bally’s Interactive is running the SaaS platform in the cloud with Crispin automation to fully control its live and video-on-demand playout and branding capabilities. The VOS360 Media SaaS is based on a flexible business model that allows Bally’s Interactive to only pay for what they use.
EARNINGS RECAP: Las Vegas Sands (LVS) beat analyst expectations when the company reported first quarter earnings on Wednesday. The company’s chief executive cited a market recovery that has been taking place. "While travel restrictions and reduced visitation continued to impact our financial performance during the quarter, a robust recovery in travel and tourism spending across our markets is now underway. We remain enthusiastic about the opportunity to welcome more guests back to our properties throughout 2023 and in the years ahead," said RobertGoldstein, chairman and CEO. "In Singapore, we were pleased to see the ongoing recovery at Marina Bay Sands progress during the quarter, with the property again delivering outstanding levels of performance in both mass gaming and tenant sales. We remain energized by the opportunity to introduce our new suite product to more customers as airlift capacity continues to improve and the recovery in travel and tourism spending from China and the wider region continues. In Macao, we were pleased to see the ongoing recovery now underway in all gaming and non-gaming segments accelerate during the quarter. We remain deeply enthusiastic about the opportunity to continue our investments to enhance Macao’s tourism appeal to travelers from throughout the region, including to foreign visitors to Macao. Our decades-long commitment to making investments that enhance the business and leisure tourism appeal of Macao and support its development as a world center of business and leisure tourism positions us exceedingly well to deliver strong growth as visitation to the market increases and the recovery in travel and tourism spending proceeds. Looking ahead, our resolute commitment to making industry-leading investments in our team members, our communities and our market-leading Integrated Resort property portfolio positions us exceptionally well to deliver strong growth in the years ahead. Our financial strength supports our ongoing investment and capital expenditure programs in both Macao and Singapore, as well as our pursuit of growth opportunities in new markets." The company also posted consolidated adjusted property EBITDA of $792M in the quarter.
Entain (GMVHF) also reported Q1 results earlier this week. Including its 50% share of BetMGM, Q1 group net gaming revenue was up 17%. to $471M. The company also touted a 28% iGaming market share. Jette Nygaard-Andersen, Entain’s CEO, commented: “2023 is off to a strong start, with continuing underlying momentum across our operations around the world. We are delivering both financially and strategically, with a record number of active customers enjoying our products, and we are executing on growth opportunities to further diversify and expand across regulated markets. In the US, BetMGM continues to grow in line with expectations and enjoyed a successful quarter which included the Super Bowl and March Madness. Looking ahead, we remain confident that our customer focus, diversification and proven ability to grow organically and through M&A will enable us to demonstrate further progress against our strategy.”
TO PROFITABILITY AND BEYOND: Morgan Stanley believes DraftKings (DKNG) will achieve its first quarter of positive EBITDA this year with a sharp ramp into 2024. Similar inflections across "profitless" growth companies have led to material outperformance over the subsequent year, a trend mirrored by Flutter Entertainment (PDYPY) following Fanduel’s first positive EBITDA.
ANALYST COMMENTARY: Barclays lowered the firm’s price target on Penn Entertainment (PENN) to $36 from $39, raised the firm’s price target on MGM Resorts (MGM) to $60 from $59 and raised the firm’s price target on Boyd Gaming (BYD) to $75 from $70. The firm maintained an Overweight rating on all three of the previously mentioned stocks. Barclays anticipates "solid" Q1 results across the board in U.S. gaming.
Stifel raised the its price target on Las Vegas Sands to $73 from $66 and reiterated a Buy rating on the shares. With fears increasing on the long-term health of the U.S. consumer, Stifel believes owning Las Vegas Sands and their Macau-centric peers, Wynn Resorts (WYNN) and MGM, presents the "best risk/reward setup" if the domestic consumer softens. If the U.S. consumer does decline, the pent-up demand from China’ and Singapore’s only gaming market should be heathy for another 12 months.
Deutsche Bank also raised the firm’s price target on Las Vegas Sands to $74 from $69 and kept a Buy rating on the shares. Las Vegas Sands reported meaningfully stronger-than-expected results in Macau, and while the company acknowledged that hotel labor will return, the firm continues to believe labor levels, the VIP gaming margin profile, and the gaming revenue mix, will add meaningfully to EBITDA and property margins, Deutsche Bank told investors in a research note.
Truist raised the firm’s price target on MGM Resorts to $57 from $54, raised the firm’s price target on Penn Entertainment to $41 from $40 and raised the firm’s price target on Boyd Gaming to $83 from $80. The Buy rating on all three companies remains unchanged. The firm’s recent field trips to Houston and the Gulf Coast indicate favorable trends in Tech and overall stability from the REITs, suggesting that the quarter should largely see beats, the firm told investors in a research note. Truist adds that the Gaming sector continues to prove its staple-like resiliency and support its positive sector outlook.
JMP Securities raised the firm’s price target on Churchill Downs (CHDN) to $298 from $273 and reaffirmed an Outperform rating on the shares. March casino revenue, the seasonally most important month of the year, capped a strong 1Q23 for land-based gaming, and the firm expects online growth to remain steady as North American sports betting will increase at a 20% 5-year CAGR and iGaming at 19%, the firm told investors.
JMP Securities downgraded Penn Entertainment to Market Perform from Outperform without a price target. The integration of the in-house technology stack in the U.S. will be a "positive step" for the company’s online business, but will not be enough to offset the market share decline, the firm noted. JMP acknowledged the underperformance of the shares in the last year versus the SP500, but finds more attractive risk/reward profiles in other areas of the gaming sector. It views Penn as fairly valued at current levels.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).
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