Bet On It: Massachusetts could delay ESPN Bet launch

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: Gan Limited (GAN) announced that it has received regulatory approval from the Nevada Gaming Commission. The approval allows Gan to commence field trial operations of its Gan Sports betting platform with its Nevada customers after the platform is certified and approved. Gan Sports has built the infrastructure to deploy into the Nevada market, including mobile applications and retail sports betting.

According to a regulatory filing, Elys Game Technology, (ELYS) received a letter from the Nasdaq Stock Market formally notifying the company that the Nasdaq Hearings Panel has determined to delist company’s common stock from the Nasdaq Capital Market and would suspend trading of company’s common stock on the Nasdaq Capital Market, effective at the open of business on October 17, 2023. The company has initiated the process of transferring the quotation of its common stock to one of the over-the-counter markets operated by OTC Markets Group Inc. The shares of the company’s common stock are expected to begin trading on October 17, 2023 and under the symbol “ELYS.”

H.C. Wainwright decreased the firm’s price target on Elys  to $1 from $2 and kept a Buy rating on the shares. after the 70% this week following the suspension of trading, the analyst told investors in a research note. The firm believes Elys “will find a much more limited pool of investors moving forward,” though it acknowledges the company never had meaningful institutional ownership to begin with.

Meanwhile, Maxim analyst Jack Vander Aarde downgraded Elys Game Technology to Hold from Buy.

NFL WEEK 6: According to Canaccord, Week 6 of the NFL season was one of the more favorable for sportsbook operators. Two upsets and low scoring across the board were responsible for the largely profitable week. The firm said not only did the outright losses of two heavy favorites wipe out many parlays and teasers, but the particularly low scoring games likely bolstered the hold operators generated from player props and same game parlays. Canaccord noted the following:

• Total industry-wide handle grew 23% y/y, to $394M, in New York during week five and gross gaming revenue, or GGR, fell 28% y/y, to $30.9M, as very
• DraftKings (DKNG) saw its handle share dip sequentially to 36% last week, although its market share was still up 1pp y/y, with FanDuel (PDYPY) leading in New York for the week with 41% handle share
• DraftKings led the New York market with a 41% GGR share during

TAKING STOCK: Most gaming stocks have underperformed the past several months as the concerns around the U.S. economy continue to rise, Morgan Stanley noted. In aggregate, the firm’s gaming stock coverage is down 17% since August 1 vs. S&P 500, with individual performance ranging from down 3% to down 37% vs. the S&P 500. Multiple compression has been a bigger driver of the underperformance, according to the firm. In fact, consensus estimates moved up modestly for Q3 and 2024 during the quarter as industry data has held in despite mounting concerns around a weakening US consumer & union negotiations in Vegas. Investor conversations have become increasingly cautious, with most investors calling for further estimate revisions next year as the second derivative in several areas of broader travel & leisure have deteriorated. Although the set-up would appear better given negative sentiment and valuation at a discount, we believe it is too early to tilt constructive into the space given stocks typically don’t bottom until close to trough estimate revisions – and we are generally below consensus.

REBRAND: Penn Entertainment has reported its timeline to rebrand from Barstool Sportsbook to ESPN Bet next month and has a potential November launch mind, according to Mike Mazzeo of Legal Sports Report. That plan could possibly be delayed, pending sports betting questions from Massachusetts about ESPN’s College Gameday show, and its employees being prohibited from offering betting plays. Penn will come to the Massachusetts Gaming Commission during its November 2 public meeting.

QUARTERLY RESULTS: Las Vegas Sands (LVS) reported third quarter results on Wednesday. “We were pleased to see the recovery in travel and tourism spending in both Macao and Singapore progress during the quarter. We remain deeply enthusiastic about our opportunities for growth in both markets in the years ahead,” said Robert Goldstein, chairman and CEO. “In Macao, we were pleased to see the recovery in both gaming and non-gaming segments progress during the quarter. We remain 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 the recovery in travel and tourism spending proceeds. In Singapore, Marina Bay Sands again delivered outstanding levels of financial and operating performance. Our new suite product and elevated service offerings position us to deliver future growth as airlift capacity continues to improve and the recovery in travel and tourism spending from China and the wider region continues. Our commitment to making industry-leading investments in our team members, our communities and our 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, our pursuit of growth opportunities in new markets, and the return of capital to stockholders. After reinstating our dividend last quarter, I am pleased to announce that our board of directors has authorized $2.0 billion of share repurchases under our stock repurchase program through 2025. We look forward to utilizing our share repurchase program to return excess capital to stockholders.” Additionally, the company authorized a $2B stock repurchase through November 3, 2025. 

Macquarie analyst Chad Beynon raised the firm’s price target on Las Vegas Sands to $68 from $66 and reaffirmed an Outperform rating on the shares. The company’s “solid” Q3 beat highlights its “steady march of recovery,” the analyst noted. The firm said Las Vegas Sands remains its top pick in Macau given its “strong management team, leadership position in mass and unrivaled capacity.” On the other hand, BofA lowered the firm’s price target on the stock to $55 from $65 and backed a Neutral rating on the shares. Shares traded higher after market driven by weak sentiment and negative investor positioning heading into Q3 as well as headline beats in Macau and Singapore and a $2B share repurchase authorization, the analyst told investors. The firm’s 2024 estimate is largely unchanged as slower market share expansion in Macau is offset by higher non-gaming and better trends in Singapore, but it lowers its multiple to reflect China macro uncertainty and lower free cash flow conversion due to concession capex.

ADDITIONAL ANALYST COMMENTARY: Barclays lowered the firm’s price target on Penn Entertainment to $30 from $36 and held an Overweight rating on the shares. The analyst expects solid underlying trends in Las Vegas and regionals to be in-line virus “muted” expectations for the gaming names. However, updates on union-related risk and cyberattack aftermath is equally important for near-term sentiment, the analyst noted. For digital, the firm expects modest upside to bottom-line results, but says the topic of new competition will remain center-stage

Barclays lowered the firm’s price target on Bally’s (BALY) to $12 from $20 and maintained an Equal Weight rating on the shares. The firm expects solid underlying trends in Las Vegas and regionals to be in-line virus “muted” expectations for the gaming names. However, updates on union-related risk and cyberattack aftermath is equally important for near-term sentiment, the analyst said. For digital, the firm expects modest upside to bottom-line results, but says the topic of new competition will remain center-stage.

In addition, Barclays decreased the firm’s price target on Penn Entertainment, as well, to $30 from $36 and backed an Overweight rating on the shares. The analyst expects solid underlying trends in Las Vegas and regionals to be in-line virus “muted” expectations for the gaming names. However, updates on union-related risk and cyberattack aftermath is equally important for near-term sentiment, the analyst tells investors in a research note. For digital, the firm expects modest upside to bottom-line results, but says the topic of new competition will remain center-stage

Stifel raised the firm’s price target on Las Vegas Sands to $70 from $69 and kept a Buy rating on the shares. The fact that shares are “essentially trading at levels that were witnessed during the start of the pandemic” when the Macau and Singapore markets were being shut down “makes no sense to us” given that these markets are essentially back to pre-pandemic levels, the analyst tells investors. With shares now trading about 30% below their historical trading range, and “no signs the Macau/Singapore markets are going to slow anytime soon,” the firm believes shares “should be able to outperform their domestic gaming peers by a wide margin,” the analyst added.

Citi analyst George Choi says the Q3 report from Las Vegas Sands proves concerns over the company’s Macau capital expenditures are overdone. The 39.4% luck-adjusted EBITDA margin in Q3 beat Citi’s forecast of 38.8% and should alleviate investor concerns on opex inflation in Macau, the analyst tells investors in a research note. The firm says management continues to show confidence in the growth prospects of Macau and is accelerating its $1B Londoner Phase II project. Citi believes the new $2B share repurchase program signals management’s view that the shares do not properly reflect the company’s fundamentals. The analyst continues to rank Las Vegas Sands as the firm’s Global Top Pick with a Buy rating and $79 price target.

Barclays lowered the firm’s price target on Las Vegas Sands to $64 from $69 and keeps an Overweight rating on the shares post the Q3 report. The firm’s out-year estimates moved lower on general China macro conservatism, and it remains positive on the shares citing the “continued recovery and washed out sentiment/valuation.”

Deutsche Bank says Las Vegas Sands last night reported solid Q3 results, which should calm concerns around share losses and a long road to margin recovery. Given the amount of consternation around the print, the stock’s “undemanding valuation,” and the more visible trajectory in Macau, relative to that of the gaming environment in the U.S., the results should “serve as a clearing event for shares,” the analyst tells investors in a research note. However, the firm expects the stock to remain largely tied to perceptions of the China macro environment, which it believes has been the primary driver of the weakness in stock in recent months.

Susquehanna lowered the firm’s price target on Churchill Downs (CHDN) to $138 from $145 and maintained a Positive rating on the shares. The firm lowered its estimates due to some softer than expected near-term trends in addition to M&A/project timing. In 2024, the firm lowered their revenue/EBITDA estimates due largely to their belief that the notable tailwind from the removal of ‘gray market’ machines in Kentucky and Virginia will take longer than their previous estimates.

Truist analyst Barry Jonas also lowered the firm’s price target on shares to $148 from $155 and keeps a Buy rating on the shares as part of a broader research note on Gaming ahead of the sector’s Q3 earnings season. Gaming fundamentals remain resilient, and while regional land-based revenues are largely flattish Y/Y on tough comps, the Strip continues to shine, the analyst told investors. Truist added that the firm has been looking for real consumer stress to no avail for over two years, though now the question is whether it finally starts to show due to record-high interest rates, student loan repayments, and potential further gas price hikes.

Truist lowered the firm’s price target on Bally’s to $16 from $23 and reiterated a Buy rating on the shares. In addition, the firm decreased the firm’s price target on Penn to $25 from $30 and reaffirmed a Hold rating on the shares. Both actions were initiated as part of a broader research note on Gaming ahead of the sector’s Q3 earnings season. Gaming fundamentals remain resilient, and while regional land-based revenues are largely flattish Y/Y on tough comps, the Strip continues to shine, the analyst contended. Truist added that the firm has been looking for real consumer stress to no avail for over 2 years, though now the question is whether it finally starts to show due to record-high interest rates, student loan repayments, and potential further gas price hikes.

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), Gambling.com (GAMB), 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).