Morningstar

Legalized Sports Betting Won't Be a Game-Changer Here

The recent U.S. Supreme Court ruling that any state may allow betting on sporting events will have limited impact on MGM, Wynn, and Las Vegas Sands.

Securities In This Article
MGM Resorts International
(MGM)
Las Vegas Sands Corp
(LVS)
Wynn Resorts Ltd
(WYNN)

Although the U.S. Supreme Court ruled this week that any state (not just Nevada) may allow betting on sporting events, we don’t expect any meaningful impact to our respective $39.50, $175, and $70 fair value estimates for no-moat

We believe the ruling offers limited incremental opportunity for operators with regional gaming exposure (MGM gets 25% of its EBITDA from regional resorts versus negligible exposure for Wynn and Las Vegas Sands). While the ruling opens the $150 billion illegal sports betting market, an estimate provided by the American Gaming Association, it would not surprise us if this marketplace refrained from now visiting regional casinos to place event wagers, as it would reduce privacy and subject gamblers to gaming taxes (Pennsylvania is levying a 34% tax on sports wagers) and integrity fees (leagues are expected to seek a portion of bets). Even if we assumed that one third of this illegal market converted to placing bets in supported facilities, the opportunity would be diluted not only by taxes and fees, but also by the low-hold mid-single-digit percentage sports betting has provided in Nevada. Further, this opportunity would be diluted as more states approve sports betting and potentially allow multiple properties to offer the service within their borders.

We also don’t expect much impact to the Las Vegas gaming region (about 55%, 25%, and 10% of our estimated 2018 EBITDA for MGM, Wynn, and Las Vegas Sands, respectively). In our view Las Vegas will remain a world destination resort due to its enclave of resorts and activities that continue to grow with the recent addition of professional sports. Further, only 34% of Vegas’ entertainment revenue came from gaming, with just 2% of that from sports betting, mitigating the risk of lost sales.

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About the Author

Dan Wasiolek

Senior Equity Analyst
More from Author

Dan Wasiolek is a senior equity analyst, AM Consumer, for Morningstar*. He covers gaming, lodging, and online travel. Names covered within the gaming industry are Wynn Resorts, Las Vegas Sands, MGM Resorts, Caesars Entertainment, Penn Entertainment, and DraftKings. In the hotel industry Dan covers Marriott, Hilton, InterContinental, Hyatt, Wyndham, Choice, and Accor. Other travel related names under his coverage are Booking Holdings, Expedia, Airbnb, Tripadvisor, Sabre, and Amadeus.

Before joining Morningstar in 2014, Wasiolek spent 16 years as an analyst and portfolio manager covering US mid- and large-cap strategies for Driehaus Capital Management. During the first half of his time at Driehaus, Dan’s responsibilities as an analyst included analyzing and recommending stocks across all sectors and industries for inclusive in the portfolios. Then in the second half of his tenure at Driehaus, Dan was responsible for stock selection and portfolio management of the US mid- and large-cap strategies, as well as co-managing in-house smaller-cap portfolios.

Wasiolek holds a bachelor’s degree in business administration from Illinois Wesleyan University and a master’s degree in business administration, with a concentration in finance, from the DePaul University Kellstadt School of Business.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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