With the election results still being counted, one thing is for sure. Anything that can generate tax revenue without being an onerous strain on citizens is getting a good bit of attention after the election, and with good reasons. The Supreme Court ruling in 2018 that struck down a 1992 federal law that effectively banned commercial sports betting in most states has been opening the door to legalizing the estimated $150 billion in illegal wagers on professional and amateur sports that Americans make every year.
Since then, more and more states are allowing casinos to open sports books and also legalizing fantasy and e-game betting. Many states, such as Louisiana, Nebraska and Maryland, have gambling initiatives on the ballot. It appears that they passed in those three states.
We screened our 24/7 Wall St. research universe looking for companies that stand to benefit and found five that are solid picks now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Boyd Gaming
This top stock remains a Wall Street favorite. Boyd Gaming Corporation (NYSE: BYD) operates as a multi-jurisdictional gaming company with 30 gaming entertainment properties located in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania. It also owns and operates a travel agency. The company was founded in 1973 and is headquartered in Las Vegas, Nevada.
The company remains a favorite for Las Vegas locals and is substantially levered to the Las Vegas market. The company generally targets largely locals in this market. The company’s downtown properties also draw Hawaiian tourists. In general, Las Vegas locals performance is less affected by weekends versus weekdays in a period than other gaming markets would be, as a substantial portion of the local economy works in hospitality.
BofA Securities has a Buy rating and a $40 price target. The Wall Street consensus target is even higher at $42.36. Boyd Gaming stock traded early Thursday at $33.45.
DraftKings
The company became a huge favorite with younger people due to the surge in popularity of fantasy football. DraftKings Inc. (NASDAQ: DKNG) operates as a digital sports entertainment and gaming company. It provides users with daily sports, sports betting and iGaming opportunities. It also is involved in the design and development of sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products.
The company entered the market back in April in a time when most companies were putting off their initial public offerings. The offering was not an IPO in the truest sense because DraftKings came public through a merger with a special purpose acquisition company called Diamond Eagle, but similar rules applied.
The stock was hammered after a big move and is offering aggressive investors an incredible entry point. Top Wall Street analysts feel that sports betting should accelerate after the pandemic and the market for sports betting in the United States could reach $19 billion by 2023 to 2025. They also expect that in 2021 and beyond, engagement with digital leisure, pent-up appetite for sports and political realities should position DraftKings to accelerate.
Oppenheimer has an Outperform rating and boosted the price target in October to $65 from $55. The consensus target is $58.74, and DraftKings stock traded at $41.55 on Thursday.
Penn National Gaming
This is an analysts’ favorite for online gaming and shares have backed up nicely after a massive run earlier this year. Penn National Gaming Inc. (NASDAQ: PENN) owns and manages gaming and racing properties, and it operates video gaming terminals with a focus on slot machine entertainment. It also offers live sports betting at its properties in Indiana, Iowa, Mississippi, Nevada, Pennsylvania and West Virginia, and it operates an online casino under the name of iCasino in Pennsylvania.
Earlier this year, Penn National bought a 36% stake in Barstool Sports valued at $450 million, along with options to increase its stake to 50% in the future. Barstool is a sports media empire that claims 66 million monthly active users, roughly 100 million social media followers and two of the top 30 podcasts in the country.
Last month, Penn and Barstool jointly debuted Barstool Sportsbook, a digital sports betting app now available in Pennsylvania. The early success has been astounding. In its opening weekend, Barstool Sports Book surpassed the DraftKings and FanDuel preliminary download records. Penn’s and Barstool’s platform now boasts 48,000 Pennsylvanian users as of Penn’s most recent update.
With a huge growth potential, and a big drop in the share price, this is an incredible play for aggressive growth investors.
The Barclays Overweight rating comes with an $85 price target. The consensus target is $74.64, and Penn National Gaming stock was last seen trading at $63.85.
Scientific Games
This is a play on the technology side of the sports betting potential. Scientific Games Inc. (NASDAQ: SGMS) develops technology-based products and services and related content for the gaming, lottery, social and digital gaming industries in the United States and internationally.
Its Gaming segment sells new and used gaming machines, electronic table systems, video lottery terminals, conversion game kits and spare parts; slot, casino and table-management systems; table products, including shufflers; and perpetual licenses to proprietary table games. It also leases gaming machines; provides gaming operations and licensing arrangements; and installs and supports casino management systems, such as ongoing hardware and software maintenance and upgrade services of customer casino management systems.
Scientific Games digital segment provides digital gaming and sports wagering solutions and services, including digital RMG and sports wagering solutions, distribution platforms, content, products and services; software design, development, licensing, maintenance and support services; Open Platform Systems; and content aggregation platforms.
Back in September, institutional investors, including highly credentialed gaming industry investor Caledonia, bought a 34.9% stake in Scientific Games. The company expects capital expenditures in the range of $210 million to $240 million and positive free cash flow for fiscal 2020.
A $50 price target accompanies the Jefferies Buy rating. The consensus target is much lower at $29.11. The last trade posted on Wednesday came in at $35.26, after a more than 3% pullback following third-quarter results that disappointed some. Scientific Games stock traded at $36.15 Thursday morning.
Wynn Resorts
While a more traditional gaming play, this high-end company is a prime Las Vegas destination and its stock offers a superb entry point. Wynn Resorts Ltd. (NASDAQ: WYNN) operates Wynn Macau and Encore at Wynn Macau resort located in the People’s Republic of China.
The Macau resorts feature approximately 284,000 square feet of casino space, which offers 24-hour gaming and a range of games, with 458 table games and 708 slot machines, private gaming salons, sky casinos and a poker room. Its two luxury hotel towers have a total of 1,008 guest rooms and suites, as well as casual and fine dining in eight restaurants, about 57,000 square feet of retail shopping in stores and boutiques, around 31,000 square feet of space for lounges and meeting facilities, and the Rotunda show. Recreation and leisure facilities include two health clubs, spas, a salon and a pool.
In Las Vegas, the company also owns and operates the Wynn Las Vegas and Encore at Wynn Las Vegas resorts, with a total of 4,748 hotel rooms, suites, and villas; 232 table games; 1,866 slot machines; a race and sportsbook and poker room in approximately 186,000 square feet of casino gaming space, including a sky casino and private gaming salons.
BofA Securities has a Buy rating and a $95 price target, while the consensus target is $90.81. Wynn Resorts stock was trading at $78.10.
It is clear that states need revenue. While some cringe at gambling as a source, for many it is more palatable than, say, recreational marijuana. All these stocks offer aggressive growth investors a great way to play the trend, while some serious selling recently has put prices at an outstanding level.
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