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The UK stocks primed to profit from surging US sports betting interest (WMH, GVC, FLTR)

There are three-UK listed betting companies in pole position to take advantage of the rocketing interest in US sports betting, according to equity analysts.

Researchers at the London-headquartered investment bank Jeffries last week raised its price targets on GVC Holdings (LSE:GVC), William Hill (LSE:WMH) and FTSE 100-listed Flutter Entertainment (LSE:FLTR), formerly Paddy Power Betfair. All three have interests in this relatively newly-sanctioned market. 

“We see two stages in the evolution of the UK-listed gaming sector,” the analysts wrote. 

“A re-rating now that the regulation-driven downgrade cycle is largely complete and there is greater earnings certainty [and] a realisation of the scale of the US sports betting opportunity.”

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Highlighting a potential “decade of growth”, Jeffries said the US market could be worth four times more per year than the UK market by 2023. Last week’s price targets of 7,900p for FLTR, 1,100p for Ladbrokes Coral owner GVC, and 230p for William Hill assumed a 20%-10%-10% split in market share. A re-rating this week suggested FLTR’s price target should be 57% higher at 13,500p, while William Hill’s target was moved 110% higher to 400p and GVC hiked to 1,500p.

The history

A 1992 federal law, called the Professional and Amateur Sports Protection Act (PASPA), effectively barred Americans from being able to lay bets on the outcome of much-beloved sports like American football, ice hockey, baseball and basketball. However, in reality, this law did little to halt the popularity of the practice. The American Gaming Association had estimated that sports fans were making $150 billion in illegal wagers every year. 

In May 2018, a US Supreme Court ruling struck down PASPA, supporting a New Jersey state ruling which would make sports gambling at casinos and racetracks legal once again. This regulatory certainty has flung the doors wide open for these London-listed companies to muscle their way in.

King of the Hill

William Hill is especially well-placed to take advantage of what — according to casino executives from MGM and Hard Rock — could be an industry worth billions of dollars a year. The 85-year-old bookmaker saw its share price sink to five-year lows in 2018, driven by the UK tightening the laws on its profitable fixed-odds betting terminals. Dubbed by campaigners as the “crack cocaine” of betting, these machines brought in huge revenues for William Hill while still remaining controversial. The bookie was forced to post a non-cash write down of £882 million in 2018, warning at the time it may have to make 4,500 staff redundant and close 700 stores.  While investors with a long position have been hit hard, there could be a good entry point now.

William Hill is already fairly well established in the US’s major gambling market of Las Vegas, and on 11 February announced it would be the exclusive sports book data provider to CBS Sports Digital, gaining access to the media giant’s 80 million users every month. 

It also has a partnership with Eldorado Resorts, whose $8.5 billion cash and shares merger with Caesars Entertainment to create the largest casino operation in the US is nearing completion.  Last year, former CEO Philip Bowcock told the market he had sanctioned William Hill’s expansion into six US states.

Its “demonstrable track record and extensive agreed market access” puts it in pole positionto make the most of the opportunity, Jeffries said.

As investors have come around to the potential in its American expansion, the WMH share price has broken out of previous ranges. With 2019 final results out on 26 February, there could be a decent long bid at current prices around 190p.

Valuethemarkets.com, Digitonic Ltd (and our owners, directors, officers, managers, employees, affiliates, agents and assigns) are not responsible for the content or accuracy of this article. The information included in this article is based solely on information provided by the company or companies mentioned above.

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

  • Tom Rodgers does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.
  • Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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