Bet On It: U.K. gambling authority says reform in the works

Miller Coors and DraftKings to team up for Super Bowl, Las Vegas Sands reports Q4 earnings and other notable stories in the sports betting and iGaming space.

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: Miller Coors (TAP) is expected to team up with online betting site DraftKings (DKNG) to let viewers make predictions about its Super Bowl commercial and stand a chance to earn money, The Wall Street Journal’s Suzanne Vranica reported. Anheuser-Busch (BUD) previously had exclusive rights to be the sole alcohol brand to be featured during the game, which it gave up last year. Viewers who want to participate in the Molson contest will have to use their DraftKings account or create one, according to the report.

MGM Resorts (MGM) announced a multi-year agreement to become a hospitality and strategic partner of the National Football League Players Association, or NFLPA. Under the agreement, the two sides will collaborate on creating new content and fan experiences with current and retired NFL players. The partnership also provides hospitality benefits to NFL players with MGM Resorts’ properties serving as the host location for a variety of NFL player-related events. "Partnering with the NFLPA is another indication of our strong commitment to the great sport of football across the U.S.," said Lance Evans, Senior VP of sports and sponsorships, MGM Resorts. "As football’s premier events come to Las Vegas, we look forward to welcoming players and creating world-class experiences for MGM Rewards members."

BetMGM, jointly owned by Entain (GMVHF) and MGM Resorts, provided an update on performance and outlook for FY23. BetMGM finished FY22 with net revenue from operations of $1.44B, ahead of prior guidance of over $1.3B. Same-state growth in net revenue from digital operations was 51% in FY22. FY22 EBITDA loss was approximately $440M, in line with prior guidance. The company said, "Financial outperformance driven by: Higher gross gaming margins resulting from improved customer experience and other product improvements. Same state CPAs reduced by 21% year-over-year due to data-focused marketing strategy and increased scale. Improved approach to player bonusing delivered by our data science team." Adam Greenblatt, CEO of BetMGM, also commented: "The talented team at BetMGM continues to execute our plan with purpose, passion, and discipline. 2022 was a year in which we delivered against many key strategic initiatives and achieved several company milestones, including exceeding our financial targets, launching a redesigned BetMGM mobile app and furthering our commitment to Responsible Gambling. With continued and unwavering support from our shareholders, we look to 2023 confident in achieving further key milestones, including $1.8 to $2 billion in net revenue from operations and being EBITDA positive in the Second Half of 2023."

Separately, in a regulatory filing, MGM Resorts disclosed that its COO Corey Sanders sold 60K shares of common stock on January 23rd in a total transaction size of $2.4M.

PlayAGS (AGS) announced a new online game content partnership with Caesars (CZR) Sportsbook & Casino. Through the partnership, AGS will provide Caesars with a variety of its online game content, for its online real-money gaming operations. Caesars Sportsbook & Casino players in New Jersey and Pennsylvania will have access to more than 30 land-based slot games from AGS’ interactive content library.

EARNINGS RECAP: Las Vegas Sands (LVS) reported fourth quarter earnings on Wednesday, falling behind analyst expectations on EPS and revenue. However, the company’s EBITDA results were considered "better than expected" by JPMorgan analyst Joseph Greff, who raised the firm’s price target on Las Vegas Sands to $68 from $55 and maintained an Overweight rating on the shares. The company’s Q4 hold-adjusted property level EBITDA results were better than expected, with upside in Singapore and a smaller EBITDA loss in Macau, the analyst told investors in a research note. The firm says both markets in January are benefitting from the relaxation of travel restrictions from Mainland China. "While travel restrictions and reduced visitation continued to impact our financial performance during the quarter, we remain confident in a robust recovery in travel and tourism spending across our markets and deeply enthusiastic about the opportunity to welcome more guests back to our properties throughout 2023 and in the years ahead," said Robert Goldstein, chairman and CEO. "In Singapore, we were pleased to see the robust recovery continue at Marina Bay Sands during the quarter, with the property delivering record levels of performance in both mass gaming and retail revenue. We are excited to have the opportunity to introduce our new suite product to more customers as airlift capacity improves and growth in visitation from China and the wider region is enabled by the relaxing of travel restrictions. In Macao, we were gratified to receive a new gaming concession during the quarter, which will enable us to continue 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. We remain deeply confident in the future of Macao and consider Macao an ideal market for additional capital investment. Looking ahead, our industry-leading investments in our team members, our communities and our market-leading Integrated Resort offerings position us exceedingly well to deliver growth as travel restrictions are further relaxed and the recovery comes to fruition. We are fortunate that 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." 

Citi analyst George Choi raised the firm’s price target on Las Vegas Sands to $76 from $73.50 and kept a Buy rating on the shares following the Q4 beat. The results were achieved with hotels at both the Londoner and Marina Bay Sands not running at full capacity, which implies "there is plenty of head room" in further EBITDA recovery when the operator is back at full strength, the analyst tells investors in a research note. Citi ranks Las Vegas Sands its "Global Top Pick."

According to a regulatory filing Caesars reported preliminary Q4 revenue of $2.81B-$2.83B, slightly ahead of analyst consensus of $2.77B. The company also reports preliminary Q4 adjusted EBIDTA of $947M-$967M. Barclays analyst Brandt Montour raised the firm’s price target on the stock to $66 from $65 and backed an Overweight rating on the shares. The company preannounced a positive Q4, as strong Las Vegas trends and better than expected digital results offset somewhat softer regional, the analyst told investors in a research note.

UK GAMBLING MINISTER SPEAKS: Paul Scully gave a speech at the Betting and Gaming Council Annual General Meeting ahead of the Gambling Act Review White Paper. He said in part: "…The millions of customers who engage with your businesses every month are for the most part choosing to spend their money on a leisure product they enjoy, and the majority suffer no ill effect. It’s important not to discount the social and entertainment benefits to customers when we think about gambling policy. But part of making sure the sector can flourish is making sure that we have the right regulation that protects people from harm. There are, to be blunt, still too many failings happening. Some customers continue to slip through protections and are allowed or even encouraged to spend too much. Some go on to suffer real and serious harm, including taking their own life in extreme cases. I commend the actions you have been taking to address this risk, and of course the ASA and Gambling Commission have been working hard to continuously improve regulation. Our Act review, however, is a real opportunity to make sure we have the balance right. To make sure we respect people’s choice to gamble and the enjoyment they get from it. But also to follow the evidence and address the products and practices which increase the risk of harm. In short, it’s an opportunity to build this county’s status as a world leader in gambling policy. I know you’ve all been engaged since the Call for Evidence launched and are patiently – or impatiently – awaiting the white paper. I also recognise regulatory certainty is important for your businesses. We do want to have the white paper out in the next few weeks to give you that solid foundation, and so we can get on with implementing reforms. I want to be clear though, that the white paper is not the final word on gambling reform. It will be followed by consultations led by both DCMS and the Gambling Commission. I want the industry to stay engaged as policies are refined, finalised and implemented… So, we are putting the finishing touches to our white paper, making the final decisions and preparing for publication. We’re a matter of weeks away from you all seeing it, and then we can start the process of nailing down details and implementing reforms." We read a negative tone and further uncertainty for the U.K. gambling industry after today’s speech from the new Minister, Jefferies told investors.

TAKING STOCK:  In December, Jefferies analyst David Katz noted that FanDuel (PDYPY), DraftKings, and BetMGM continued to lead in overall score, according to the firm’s Digital Gaming Brand Matrix. FanDuel and DraftKings compete closely across most categories. While FanDuel leads in Google Search Interest, Webpage Visit Duration, and App downloads, DraftKings leads in Web Traffic Visit in Monthly Active User. Meanwhile, BetMGM maintained third place in MAU and Downloads. Jefferies noted that the middle of the pack remains "very competitive." Penn Entertainment (PENN) held on to the fourth position this month, followed by PointsBet (PBTHF), Bet365, Caesars, and BetRivers (RSI). Notably, Penn scored particularly well in social categories, with the highest social fan growth, and engagement score. The analyst’s favorite names are Flutter Entertainment, DraftKings, MGM Resorts, Entain and Rush Street Interactive. Jefferies told investors in a research note that the firm expects the top three operators to remain market leaders in online sports betting.

ANALYST COMMENTARY: Craig-Hallum analyst Ryan Sigdahl initiated Flutter Entertainment with a Buy rating and 165 GBp price target. The firm expects a fundamental inflection in 2023 with EBITDA growing 50% this year and again in 2024, and thinks Flutter is a stock to own given its double-digit revenue growth, meaningful margin expansion and strong free cash flow, the analyst told investors in a research note.

On the other hand, JPMorgan analyst Estelle Weingrod downgraded Flutter Entertainment to Neutral from Overweight with an unchanged price target of 15,900 GBp. The analyst now has higher conviction elsewhere in the sector following the stock’s recent rally.

Argus analyst John Staszak upgraded Las Vegas Sands to Buy from Hold with a $68 price target. The company is expected to benefit from the end of China’s strict COVID rules, with authorities having eased travel restrictions late last year, the analyst tells investors in a research note.

CBRE analyst John DeCree upgraded Las Vegas Sands to Buy from Hold with a price target of $68, up from $47, after the company sounded "an upbeat tone on the initial recovery in Macau" along with its Q4 earnings report. The firm’s new price target is driven by higher estimates in both Macau and Singapore and a higher multiple in Macau as the recovery there takes hold, the analyst tells investors in a research note.

Stifel analyst Steven Wieczynski raised the firm’s price target on Caesars to $68 from $63 and reaffirmed a Buy rating on the shares after having raised its out year EBITDA estimates by about 10%. The firm, which believes "investors are confused as to what to do" with the shares, believes current trading levels are attractive and argues it is "time for investors to revisit this story." Stifel continues to believe the Las Vegas Strip will remain resilient over the next two years and notes that Caesars has some accretive projects coming online that could help offset any weakness in regional gaming markets.

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) and Wynn Resorts (WYNN).

Keywords: Super Bowl, commercial, partner, NFLPA, outlook, BetMGM, online gaming, earnings, EBITDA, UK, Betting and Gaming Council, reform, White Paper, Gambling Act Review,