Europeans Get Lucky in U.S. Betting, But Analysts Have Questions
(Bloomberg) -- The end to a federal ban on U.S. sports betting offers major potential for European gambling operators such as William Hill Plc and Paddy Power Betfair Plc, though the scale and timing of the opportunity remains to be seen, according to analysts.
While sports gambling could begin in a matter of weeks in New Jersey, and other states may follow shortly after, issues such as tax rates, the scale of permitted marketing and who will be allowed to operate remain to be resolved, analysts said. Investors may also see some European operators as takeover targets as potential market entrants jockey for position.
After about 1.5 billion pounds ($2 billion) was added to the value of the U.K.’s main listed gambling companies on Monday, the stocks gave back some of their gains Tuesday, with a crucial U.K. government decision on reducing the maximum stake for fixed-odds betting terminals due any day soon.
Here’s a round-up of what analysts are saying about the implications of the end to the U.S. sports-betting ban.
Goodbody, Gavin Kelleher
- News is “an obvious positive for the European listed operators”
- Significant expansion of legalized sports betting now likely in the U.S., though a number of variables to take into account
- It could take a number of years before there’s wide-scale U.S. sports betting and significant investment may be required to develop a meaningful business
- European operators could attract speculation as potential M&A targets given the unique sports betting skill set they possess
Davy, David Jennings
- “A momentous decision for the gaming industry globally”
- Would caution against assuming too big a prize too soon
- Shape of a regulated landscape is yet to be determined, with many undecided variables ultimately dictating the size of the opportunity
- Strategic value of companies with sports betting capabilities has increased, irrespective of the near-term earnings impact
Morgan Stanley, Ed Young
- News opens up a market that could be material in time
- Sees potential for an uneven state-by-state regulatory environment to add complication (and cost), as well as taxes, fees to sports leagues, and high initial marketing outlays
- Land-based interests (casinos, tribal entities, sports venues) will be protected
- Sees William Hill (equal-weight) and Paddy Power Betfair (underweight) as well positioned to access a growing market, given their existing U.S. businesses
- Expects competition from other operators and suppliers for partnerships to be intense
- Sees potential for U.S. companies to buy into the European gambling sector
- Overturn of the U.S. law is likely to have a mixed result
- A handful of states are likely to move “quickly and relatively liberally,” though more are likely to move slowly and with very restrictive positions
- The majority will almost certainly wait and see
- “The floodgates of optimism are therefore unlikely to turn into a flood of business opportunities except in a small number of specialist circumstances”
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