As World Cup Kicks Off, Here's How Investors Can Seek to Cash In
If favorite Brazil lifts the trophy on July 15, bookmakers could be left nursing hefty liabilities.
(Bloomberg) -- The stage has long been set for soccer’s FIFA World Cup that kicks off in Russia later on Thursday. Investors and analysts have already factored in the potential benefits for the likes of brewers, retailers and advertisers. So what opportunities remain?
For the likes of betting and pub companies, match results in the month-long competition are likely to have some influence on their financial performance. While bookmakers would benefit from a run of upsets and tied games, too many victories for favored teams such as Brazil would be a setback. The longer that England stays in the tournament, the better for British bar operators. Should Australia surprise, expect a boost for that country’s Domino’s Pizza Enterprises Ltd. And the winning team’s uniform supplier will also likely get a benefit.
“The winners from this competition are typically well established, with supporters more inclined to visit pubs for big games, or play host at home, driving up sales of big screen TVs and alcohol,” Joshua Mahony, a market analyst at IG in London, said in an email.
Here’s a round-up of sectors that are likely to be affected.
Betting
The tournament will provide fertile ground for bookmakers such as Paddy Power Betfair Plc, GVC Holdings Plc and William Hill Plc in a race to recruit online customers. Though the main influence on short-term financial performance is likely to be the outcome of the games themselves. Should favorite Brazil lift the trophy on July 15, bookmakers could be left nursing hefty liabilities. With most of the big publicly-traded betting companies based in the U.K., victory for England would also prove costly.
The volume of bets placed on the event is set to soar, with smartphone apps making wagering easier than ever before. The Betfair betting exchange has reported “strong levels of activity” in the run-up to the tournament and expects to take 2.5 billion pounds ($3.3 billion) of wagers. Australia’s Tabcorp Holdings Ltd. may see a revenue gain of up to A$140 million ($106 million) from the competition, more than the A$126 million from Brazil 2014, according to Andrew Orbach, an analyst at Taylor Collison.
By contrast, the World Cup may be a short-term negative for industries like casinos that stand to lose out when gamblers’ attention and money shift elsewhere. During the last competition in 2014, Macau’s gross gaming revenue declined in both June and July and didn’t pick up even after the tournament ended. Deutsche Bank last week trimmed estimates on Wynn Resorts Ltd., saying the World Cup “could cause some VIP softness in June.”
Pubs
Pubs in countries whose teams progress to the tournament’s later stages stand to gain from hosting throngs of jubilant fans. Disappointment caused by an early exit is likely to have the opposite effect. According to Berenberg analysts, the World Cup will be a boon to U.K. pub operators such as Greene King Plc, with the brokerage estimating that some may see a 2 percent to 3 percent boost to like-for-like sales for the quarter.
Sports Gear
The maker of the winning team’s uniform can expect a short-term boost from sales of replica shirts. At the last World Cup in 2014, Adidas AG sold more than 8 million jerseys, including 2 million in the colors of winner Germany. In Russia, Adidas is sponsoring 12 of the 32 teams, including perennial powerhouses Argentina, Spain and Germany, with arch-rival Nike Inc. supplying 10 teams including Brazil, Portugal and France. After Italy’s elimination in qualifying, Puma AG relies on Senegal, Serbia, Switzerland and Uruguay.
Sporting-goods retailers such as Dick’s Sporting Goods Inc., JD Sports Fashion Plc and Sports Direct International Plc can also anticipate a brief bump to sales as the tournament stokes demand for soccer gear.
“Of the athletic brands, Adidas has the most exposure to football and will be the biggest beneficiary through sales of jerseys and soccer balls,” Cristina Fernandez, an analyst with Telsey Advisory Group, tells Bloomberg in an emailed statement.
Livestreaming
JPMorgan Chase & Co. expects Twitter Inc. to benefit after the company partnered with Fox Sports to show World Cup highlights in almost real time. This year’s tournament could be a much larger deal for Twitter than it was in 2014, when the event contributed about $24 million of revenue in the second quarter, according to MKM Partners analyst Rob Sanderson. The competition could also provide traffic growth for Akamai Technologies Inc., which helps customers deliver content over the Internet, and for broadcasting and telecom companies that provide real-time streaming to mobile users.
Travel
Fans following the games are more likely to be glued to the TV and may procrastinate planning their summer travel, according to SunTrust analyst Naved Khan. This could potentially lead to weakness for Booking Holdings Inc.
TV Rights
U.S. advertising revenue tied to the World Cup is expected to be lower than in 2014 after the national team failed to qualify, according to Bloomberg Intelligence. Twenty-First Century Fox Inc. and Comcast Corp.’s Telemundo secured rights to broadcast the 2018 and 2022 World Cups for about $1 billion back in 2015. The timing of matches -- many will be early in the morning -- will likely affect both networks too. Telemundo though, will be less impacted overall, “just because Hispanic viewers are still going to tune in,” BI analyst Amine Bensaid says.
World Cup Add-ons
FIFA video-game maker Electronic Arts Inc. may be another World Cup winner. Bloomberg Intelligence’s Matthew Kanterman wrote last month that he expects EA’s forecast will probably “prove conservative amid robust growth of live services such as FIFA Ultimate Team, with the World Cup probably driving a boost.”
Food and Beverages
Thai Beverage Pcl stands to benefit in soccer-mad Thailand. RHB Research Institute Pte. analyst Juliana Cai anticipates the World Cup will stimulate consumption for alcoholic beverages. Singapore’s Food Empire Holdings Ltd., which generated about 43 percent of sales last year from Russia, may also benefit.
The tournament is also likely to support earnings at Australia’s Domino’s Pizza Enterprises in June. Macquarie upgraded the stock to outperform from neutral on May 31.
Trading Volume
Besides losing sleep, Asian traders who have to stay up overnight for matches may also lose business. Trading volume and volatility are expected to slump in the next month. “People watch the World Cup and forget to trade,” said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong. “They watch it overnight and don’t come to work.”
To make your own World Cup results prediction, click on WCUP.
--With assistance from Lisa Pham, Daniela Wei, Abhishek Vishnoi, Matthew Burgess, Abigail Wen Yi Ng and Kintan Andanari.
To contact the reporters on this story: Austin Weinstein in New York at aweinstein18@bloomberg.net;Janet Freund in New York at jfreund11@bloomberg.net;Paul Jarvis in London at pjarvis@bloomberg.net
To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Teo Chian Wei, Paul Jarvis
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