Morgan Stanley anoints online casinos, sports betting as prime post-virus investment themes

In a recent note to clients, Morgan Stanley highlights 50 mega-trends receiving more attention because of COVID-19. Those themes are grouped into six categories, including e-services, where the bank slots online betting.

The gaming industry is shaping up to be one of the epicenters of shifts mentioned by the bank. A shutdown of domestic casinos forced by the pandemic prompted some gamblers to move online. In states such as New Jersey and Pennsylvania where internet slots and table games are permitted, revenue generated from those activities jumped during the land-based casino closure period.

Morgan Stanley includes concepts such as fintech (contactless payments and digital banking) and telehealth in its e-services universe, along with iGaming and sports wagering. The bank frequently mentions the idea that the coronavirus will serve as an impetus for more states to embrace web-based casinos and sports wagering.

At least 27 states face budget shortfalls of 10 percent or more. Of that group, at least nine are mulling cannabis legalization as soon as this year to increase revenue, while a minimum of four – Louisiana, Maryland, South Dakota, and Virginia – will put sports betting proposals before voters on the November ballot.

How to Play The Online Boom
Morgan Stanley highlights DraftKings, Eldorado Resorts and Penn National Gaming, among others, as the best ideas for investors looking to tap iGaming and sports wagering expansion.

The bank was among the first to initiate coverage of DraftKings following the company’s April 24 initial public offering. Analyst Thomas Allen saying the firm is “an almost pure play” on internet casino and sports wagering growth in the US.

Regarding Penn National, that stock is up 178.23 percent in the current quarter. A slew of analysts are hopping on the bandwagon, citing the two aforementioned catalysts, though some that cover the name believe the operator’s land-based casino business is now under-appreciated because the investment community is so intensely focused on sports betting.

As for Eldorado, that company’s online casino and sports wagering profiles will get big face lifts when it seals its $17.3 billion acquisition of Caesars Entertainment (NASDAQ:CZR). The combination of Caesars’ brand recognition and deep sports betting footprint are earning ERI kudos on Wall Street as a desirable gaming growth idea.