Boyd Gaming and Penn National “are likely the biggest beneficiaries in our coverage given their smaller market caps and exposure to numerous states,” Morgan Stanley analysts wrote in a note Tuesday.
Morgan Stanley believes sports betting will likely represent less than 2 percent of the $120 billion in U.S. gaming revenue, with the most optimistic case setting the bar at 5 percent. If Boyd and Penn claim a 10 percent market share in the $2 billion market, Morgan Stanley estimates the two gaming companies could bring in about $1.50 per share to $1.90 per share in additional value.
“[The ruling is] a slight positive for regional gaming stocks,” Morgan Stanley said.
Sports gambling is coming quickly to about a dozen states after the Supreme Court opened the door to the practice. New Jersey is expected to tax sports betting “at relatively reasonable levels,” Morgan Stanley said, with an 8 percent tax on “land-based” bets and 12.5 percent for mobile bets.
The most notable challenge to states remaining is from Congress, according to Cowen analysts. However, “sports gambling opponents lack the votes to enact a ban,” Cowen said. States are hungry for the tax revenue, which could be as much as $3.4 billion per year, according to Cowen.
“This is money that states remain desperate for as they try to meet infrastructure, education and other spending needs,” Cowen said. “
Morgan Stanley said there is also potential value for media companies, “including sports team and rights owners” such as Liberty Media and Madison Square Garden, as well as benefit for Disney and MSG Networks “from increased advertising on live sports content.”