Bet On It: DOJ supports lawsuit alleging price fixing at Las Vegas hotels

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space.

SECTOR NEWS: Red Rock Resorts (RRR) announced that it will release the company’s financial results for the third quarter 2024 on Thursday, November 7 and will hold a conference call on the same day at 6:00 p.m. ET. The conference call will consist of prepared remarks from the company and will include a question and answer session. The company’s conference call that was previously scheduled for November 6 has been canceled.

The Justice Department filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit supporting customers who accused Caesars Entertainment (CZR) and other Las Vegas hotel companies of using algorithms to fix prices, reported Bloomberg’s Katie Arcieri. The DOJ is quotes as having said in its brief: “Pricing algorithms can process more information more rapidly than humans aided by prior communications technologies. For this reason, such algorithms can increase the means and opportunities for collusion among competitors.” A group of consumer plaintiffs who stayed at various Vegas hotels filed an appeal to the Ninth Circuit after Judge Miranda Du of the U.S. District Court for the District of Nevada dismissed the case in May, the report noted.

Churchill Downs (CHDN) announced the planned development of a $40M to $50M historical racing machine, or HRM, entertainment venue in Calvert City, Kentucky. CDI plans to open the new 23,000 square-foot facility with 250 HRMs, a sports bar and a sportsbook, and a simulcast center in early 2026. The new facility will serve as an extension of Oak Grove Racing, Gaming and Hotel and will be CDI’s eighth historical horse racing entertainment venue in the Commonwealth of Kentucky.

Sportradar (SRAD) is enhancing its partnership with the NBA this season through the introduction of a suite of fan engagement solutions. The company said these products represent the next phase in the evolution of basketball consumption benefitting not only the NBA but also operators and media partners. Sportradar, leveraging AI and its advanced, proprietary technology, has launched a suite of next-generation products for the NBA by accessing the full range of official NBA content, including skeletal tracking data.

MGM Resorts (MGM) and Marriott (MAR) plan to convert a property on the Las Vegas Strip to the W Hotels brand within the Marriott Bonvoy portfolio. Anticipated to complete its conversion later this year, W Las Vegas marks the latest step in the companies’ long-term strategic licensing agreement announced in July 2023. Located on the Mandalay Bay Campus, the property is slated to officially join the W Hotels portfolio later this year, with additional plans for the property to be announced in the future. With the addition of W Las Vegas, MGM Collection with Marriott Bonvoy will encompass 12 destinations on the Las Vegas Strip.

Penn Entertainment (PENN) files to sell 469K shares of common stock

EARNINGS RECAP: Gaming Leisure and Properties (GLPI) reported third quarter results that beat analyst expectations. The company highlighted accretive deals with Bally’s when discussing earnings for the quarter. Peter Carlino, chairman and CEO of GLPI, commented, “GLPI’s expansion and growth momentum continues unabated with strong third quarter financial results reflecting the consistent performance of our legacy tenant portfolio and the addition of two additional tenants earlier this year. During the quarter we also set the course for continued mid- and long-term growth through the actualization of several significant accretive transactions with Bally’s which we expect will benefit comparisons in the fourth quarter and beyond. Third quarter total revenue rose 7.1% year over year to $385.3 million and AFFO grew 6.8%, highlighting the measured growth of our property portfolio, rent escalations and our discipline around liquidity and our capital structure. With our opportunistic approach to portfolio expansion, the proven long-term resiliency of our tenants’ revenue streams, and attractive rent coverage ratios across our portfolio, we expect to continue to deliver strong capital returns and yields for our shareholders. Reflecting these factors, our third quarter 2024 dividend of $0.76 per share increased from $0.73 per share in the year-ago period and $0.705 in 2022.” Additionally, the company reaffirmed its full-year outlook in the report.

Boyd Gaming (BYD) also beat consensus in the third quarter, touting Las Vegas and other regional investments. CEO Keith Smith said: “Our company continued to produce solid results in the third quarter, as underlying customer trends remained stable. During the quarter, we realized the benefits of our recent investments in our Downtown Las Vegas and Midwest & South segments. These investments produced strong returns, driving revenue and Adjusted EBITDAR gains in both segments. We also benefited from excellent performances in both our Online and Managed businesses, demonstrating the value of our diversified business model. We strengthened our growth pipeline, securing an opportunity to develop a best-in-market casino resort in Norfolk, Virginia, while continuing work on property enhancements nationwide. And we continued our commitment to returning capital to shareholders, repurchasing more than $200M in shares during the quarter. In all, we are pleased with the ongoing performance of our business and remain focused on enhancing shareholder value.” Stifel raised the firm’s price target on Boyd to $74 from $67 and kept a Hold rating on the shares. Boyd is “slowly starting to stick out from their peer group” given continued healthy, stable trends in their core Las Vegas locals market coupled now with a “decent-sized long-term growth project” in Norfolk, Virginia that will come online in stages starting next year, the analyst told investors following the company’s Q3 report.

On the hand, Las Vegas Sands (LVS) fell short of analyst figures in Q3, noting decreased hold in Singapore and a disruption in Macau. “Although our reported financial results for the quarter reflected lower than expected hold in Singapore and the impact of disruption from our ongoing development work at the Londoner in Macao, we continued to execute our strategic objectives during the quarter. We remain enthusiastic about our opportunities to deliver industry-leading growth in both markets in the years ahead as we execute our capital investment programs in both Macao and Singapore,” said Robert G. Goldstein, chairman and CEO. Seaport Research raised the firm’s price target on Las Vegas Sands to $60 from $56 and backed a Buy rating on the shares. The company’s Q3 results were “solid” in Macau amid continued disruption at Londoner and closure of Cotai Arena, with EBITDA beating estimates, the analyst tells investors. The firm is raising its price target on the stock due to 2025 ramp up catalysts.

While Churchill Downs missed EPS expectations of analysts, the company beat revenue comparisons. The company said it delivered record third quarter revenue and adjusted EBITDA across both Live and Historical Racing and Gaming segments and record third quarter Adjusted EBITDA in its TwinSpires segment.

NFL WEEK 7: The NFL is a major contributor to results for U.S. sports betting operators due to the high volume of wagers placed on football compared to other sports, according to Canaccord. Weeks 5 through 17 of the 2024 NFL season will occur during Q4, alongside an active schedule for other major sports. Week seven in the NFL was favorable for the public, although perhaps slightly less lucrative than the previous week, the firm told investors in a research note. For the second consecutive week, none of the five largest underdogs won outright, with only one covering the spread. However, five underdogs did win outright during the week, and seven covered the spread. Nine out of fifteen games went under the total in week seven, though four of five standalone games went over. This second straight week of challenging results might lead operators to adopt a more cautious outlook for Q4. Sports media and affiliate marketing company XLMedia announced an agreement to sell its North American operations to Sportradar for $30M in cash, including a $20M upfront payment and a $10 earnout. According to XLMedia, the North American business generated $27.5M in revenue and $5.5M in EBITDA in 2023. Canaccord noted that this acquisition is expected to enhance Sportradar’s Ad business and strengthen its ties with sportsbook operators. In New York, total handle grew 20% year-over-year to $484M during week six, while very customer-friendly outcomes and a challenging comparison led to a 67% year-over-year decline in gross gaming revenue, or GGR, to $21m, the firm added. FanDuel (FLUT) and DraftKings (DKNG) remain in close competition for the leading position by handle in New York, holding 38% and 36% of the total, respectively. However, FanDuel’s GGR share rose to 67% due to the unusually low industry-wide hold, with several operators experiencing a negative hold for the week. Fanatics was the biggest gainer among challenger brands, with its handle share rising 640 basis points year-over-year to 7.8% last week. ESPN BET’s handle share remained steady in its second full week of operations in New York, holding at 1.8%.

ADDITIONAL ANALYST COMMENTARY: BTIG lowered the firm’s price target on MGM Resorts to $47 from $52 but reiterated a Buy rating on the shares ahead of its Q3 results. The firm is adjusting its model to reflect a lower mark-to-market value on MGM China, the analyst told investors in a research note. BTIG adds that a shift to iGaming-only by MGM – paring back its sports betting business – would be $500M beneficial to its U.S. BetMGM EBITDA this year.

Truist told investors in a research note that the fear of a large, deep gaming downturn seems to have passed for now, even though investor sentiment still seems to reflect consumer malaise. The firm made the following price target changes:

• Raised the firm’s price target on Everi Holdings (EVRI) to $14.25 from $10 and kept a Hold rating
• Lowered its price target on Light & Wonder (LNW) to $115 from $120 and reassessed a Buy rating
• Cut the firm’s price target on Golden Entertainment (GDEN) to $36 from $38 and backed a Buy rating
• Slashed its price target on MGM Resorts to $56 from $58 and held a Buy rating
• Demoted its price target on Red Rock Resorts to $58 from $63 and maintained a Hold rating
• Axed the firm’s price target on Penn Entertainment to $23 from $25 and reiterated a Buy rating
• Boosted its price target on Boyd Gaming to $77 from $75 and confirmed a Buy rating

Mizuho lowered the firm’s price target on Penn to $24 from $25 and kept an Outperform rating on the shares. Heading into the Q3 print, the firm reduced Q3 and fiscal 2024 estimates within the company’s land-based retail operations to reflect poor hold and disruptive weather.

JPMorgan upgraded Sportradar to Overweight from Neutral with a price target of $15, up from $12, after meeting with management. The firm came away “incrementally encouraged” with Sportradar’s s ability to leverage its sports data rights to innovate on product and generate pricing power that is garnering higher share of wallet. This creates a favorable set up for margin expansion, the analyst contended. JPMorgan sees multiple upcoming catalysts that should provide upside to shares, including easier comparisons in the Q4.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (FLUT), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).