This week, the Supreme Court overturned a 26-year law that essentially prohibited sports-based wagering in all but a handful of states. This is a segment of the gaming market that has been tightly controlled since 1992 by federal law, but that has seen a major increase in illegal bets since the turn of the century. This week’s decision opens the door for individual states to begin offering sports betting as they deem appropriate, which naturally also translates to opportunity for gaming companies all over the country to begin offering legal sports books.
There are some well-known names of casinos and resorts that are already known to operate very profitable sports books in Las Vegas, such as Wynn Resorts Limited (WYNN) and MGM Entertainment (MGM), and so the liberalization and expansion of sports betting should certainly translate to big growth for that portion of their existing businesses; but the purpose of this article today is to identify a few companies that you might not automatically associate with sports-based gaming, simply because their focus is on the technological backbone that supports the gaming industry.
An unknown element of the future of sports betting is to what extent gaming companies like WYNN, MGM, or Ceasars Entertainment Corp (CZR) will be limited only to the states they operate in. That puts the stocks in this list at an advantage, since they are the companies that provide the software, equipment and support systems their businesses run on, and so are not restricted by state-driven regulation on where their business operates. Here they are.
Scientific Games Corp (SGMS)
Current Price: $60.15
Monday’s Supreme Court decision made an immediate impact on this company’s stock, driving it from about $52 per share to its current level as of this writing. That’s an increase of more than 15% in just five days, driven almost completely by the expectation that their business, which includes sports bookmaking software, lottery management platforms and video poker and app-based gaming will benefit from an increase in legalized sports wagering.
SGMS is a company with a $5.4 billion market cap, placing it in the mid-cap category. Their revenue has tripled since 2013 from a little under $1 billion to more than $3 billion for the most recent trailing twelve-month period. Their earnings per share have also been increasing since the first quarter of 2017. The company has been positioning themselves for this week’s ruling for some time with their OpenBet product suite and integrated systems to create a seamless experience for sports books as well as their customers.
International Game Technology PLC (IGT)
Current Price: $30.42
Based in the United Kingdom, IGT is already hip-deep in sports betting, offering technology that is designed to make gaming fun and easy. They are the world’s biggest provider of slot machines and lottery networks, and they use a big portion of their revenue to fund ongoing research & development to keep advancing gaming technology. One of the things that differentiates this company from their peers in the both the software and the gaming industries is that they pay a dividend that offers an annual yield of about 2.66%.
Another important element of strength exists in IGT’s balance sheet, which shows that their cash and liquid assets increased by more than 140% from the third quarter of 2017 to the end of the year. This gives them good financial flexibility to service their debt and keep financing R&D efforts that could keep them on the forefront of the growth the U.S. is expected to see in sports wagering.
Stars Group Inc. (TSG)
Current Price: $35.95
Also based outside the United States, TSG is a Toronto-based company founded in 2001 and that has up to this point relied primarily on online poker gaming. Last month the company made a big move into sports betting, paying out about $4.7 billion to acquire Britain-based Sky Betting & Gaming, which is best known for its sports bookmaking technology. The combination translates to the largest publicly-traded online gaming entity in the world. Depending on the flexibility states decide to give the gaming industry in offering sports bets across state borders, TSG could be in position to dominate the U.S. online betting space.