Earlier this year the U.S. Supreme Court struck down a law that prevented gambling on sports in any state except Nevada (because sports gambling is already legal in Nevada). This opens the door for other states to profit from gambling on sporting events through taxes. This also adds an additional revenue stream for casinos operating outside of Nevada. With the 2018 NFL Season just kicking off, here are three smallcap casino companies that could big benefactors from the changing sports gambling landscape:
Golden Entertainment, Inc. (NASDAQ: GDEN) has had a rollercoaster 2018. The stock started the year near $32, then visited $22 en route to $34, and is now trading around $28. Golden operates mainly in Nevada, with one property located in Maryland.
The company also operates a player tracking system that is used not only for gaming, but also for customer rewards programs for companies like CVS Health Corporation (NYSE: CVS) and Buffalo Wild Wings. The combination of this tracking system, along with casinos and taverns it owns in Las Vegas, has the company growing sales at an average of 115% the past 5 years.
The new sports betting scheme allows the company to introduce sports betting in Maryland, a state at the center of multiple professional and college teams. It could also add revenue to any expansion the company may undertake on the east coast. With earnings next year projected to grow 69%, the company is looking to record positive earnings with a projected price-to-earnings ratio (P/E) of 22.
Full House Resorts, Inc. (NASDAQ: FLL) operates five casinos, four of which are outside of Nevada. With the majority if its casinos operating outside of Nevada, the new sports betting law should have a positive effect on Full House’s revenue. Current projections are for revenue to grow over 140% next year.
The stock was trading around $4 late last year, and is now trading at support around $3. Trading at only a 0.5 price-to-sales ratio (P/S), the company has been in turnaround mode and is expected to turn earnings positive next year. The additional revenue stream from the sports book should add to this story.
Another factor to consider with Full House is the current acquisition environment. Large casinos are acquiring their smaller competitors at a feverish clip. There have been more than 20 acquisitions for a combined total of over $10 billion in the past four years. With four of its five casinos located outside of Nevada, FLL may be in the crosshairs of a larger company.
And, speaking of acquisitions, Dover Downs Gaming & Entertainment, Inc. (NYSE: DDE) had been struggling for several years until the recent announcement the company would be acquired by Twin River Worldwide Holdings. This is a somewhat unusual acquisition in that Twin River is a privately held company, and is using the acquisition as a vehicle to go public.
You probably missed the bump from $2 to just over $3 in Dover Downs’ stock from the acquisition announcement. But, that doesn’t mean you can’t get into the deal. Purchasing DDE now will get you shares in the newly public Twin River, when the deal closes later this year.
Denis McGlynn, CEO of Dover Downs said the company had been operating “bare bones” for years. The new ownership should inject some life into the combined entity, and the new sports book will add an additional profit source. Now may be a perfect time to read up and learn more about Dover Downs Gaming & Entertainment.
With the Supreme Court ruling on their side, these casino stocks now have the “green light” to jump into the multi-billion dollar sports gambling business. Golden Entertainment, Full House, and Dover Downs can all add revenue streams that were previously forbidden. This provides some much-needed hype for the gambling industry, which has been struggling in recent years. Now it will be up to each individual company to create a unique brand and user experience to help draw in gamers.
Disclaimer: The author and Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.
Article By: Steven Adams