Churchill Downs, Eldorado Resorts Could be Interesting For Investors Wagering on Sports Betting in 2020

Posted on: December 23, 2019, 11:55h. 

Last updated on: December 23, 2019, 04:24h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Churchill Downs Inc. (NASDAQ:CHDN) and Eldorado Resorts, Inc. (NASDAQ:ERI), two of 2019’s best-performing gaming equities, have the potential to deliver more upside for investors next year with the help of sports betting, say some analysts.

Thirteen states currently permit sports betting. But that number is poised to grow in significant fashion in 2020, with markets such as Colorado, Illinois, Michigan, and New Hampshire, among others, coming online. Churchill Downs and Eldorado both operate gaming properties in the Prairie State, which is expected to become one of the largest sports wagering markets in the US, and both have exposure in the Centennial State, too.

Jefferies equity analyst James Wheatcroft sees the US sports betting market generating $13 billion in revenue by 2023.

That estimate looks increasingly conservative given how fast states are moving to legalize sports betting,” said the analyst in a recent note to clients.

Churchill Downs and Eldorado, shares of which are up 65 percent and 59.21 percent respectively year-to-date, are two of Wheatcroft’s preferred gaming picks for 2020.

A Smart Deal

Reno-based Eldorado currently owns 26 gaming venues in 12 states, including five – Indiana, Iowa, Mississippi, Nevada and New Jersey – where sports betting is operational. That doesn’t include the company’s three total properties in Colorado and Illinois, which are expected to enter the sports wagering fray over the next several months.

Eldorado’s sports betting footprint is poised to exponentially grow as it completes its $17.3 billion takeover of Caesars Entertainment Corp. (NASDAQ:CZR) in the first quarter.

Not only does that acquisition bring a slew of Caesars’ Nevada venues into the Eldorado portfolio, it gives the buyer control of a combined four properties in New Jersey and Pennsylvania and six venues in Indiana and Iowa. Those four states are among the fastest-growing sports betting regions in the US.

Though not mentioned by Wheatcroft, William Hill is another sports betting stock that could deliver in 2020, because that company has a long-standing partnership with Eldorado, one that it believes carries over to the Caesars buy.

Alternative Views

Earlier this year, Morgan Stanley forecast a $7 billion domestic sports betting market by 2025, based on the assumption that 36 states will have approved it by then.

The bank was one of the first to offer separate projections for brick-and-mortar and online sports wagering, estimating $1.5 billion in 2025 revenue for on ground books and $5 billion for internet venues.

Through its BetAmerica Sportsbook, internet casino platform, and the TwinSpires online betting portal, Churchill Downs has a significant web-based wagering footprint.

The company also recently opened a retail sports book in Indiana, which has rapidly become one of the fastest-growing sports betting destinations in the country.