DraftKings, MGM and other gambling stocks got a boost on the stock market today as New York Gov. Andrew Cuomo seems closer to allowing online sports betting in the state.
In an effort to shore up New York’s Covid-battered state budget, Cuomo said in a statement to the Daily News that “New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in tax revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis.”
The news buoyed stocks like DraftKings (DKNG) and MGM Resorts (MGM), which already have access to the New York market. MGM recently purchased a property in Yonkers, N.Y., while DraftKings and FanDuel both have access through land-based casinos, too. So these companies already have a foot in the door.
DraftKings, Other Gambling Stocks
DKNG stock hit an intraday high of 51.80 and MGM reached 32.38 on the news. But those gains dropped off when it became clear that Cuomo was leaning toward allowing online sports betting through its lottery system rather than casinos.
DraftKings shares rose 3% to 49 on the stock market today. DKNG stock has a 56.08 handle buy point from a cup base, after a breakout from a prior handle fizzled. Meanwhile, MGM stock rose 2.7% to 31.18. It’s well-extended from a 23.57 buy point from a double-bottom base.
“The initial optimism has been muted a little bit by the updated news of a lottery preference,” said Eric Ramsey, analyst for PlayUSA.com. “If New York allows sports betting through the lottery, it essentially shuts the door on these big sports betting companies.”
In other states where online sports betting is through lottery operations, there is usually one company that has a monopoly, Ramsey says. And the companies are typically not big gambling names like MGM or DraftKings. Instead, they are relatively smaller firms like IGT in Rhode Island and Intralot in Washington, D.C., and Montana.
Among other gambling stocks Bally’s (BALY) surged to a 52-week high intraday to 54.85, before paring gains to close up 1.3% to 49.63. Caesar’s Entertainment (CZR) rose 2% and Penn National Gaming (PENN) 2.6%. Wynn Resorts (WYNN) rose 0.6%, at the edge of the 5% buy zone.
Gambling Legislation On The Rise
Gambling advocates in New York have been pressing Cuomo to pass legislation allowing online sports wagering in an effort to keep betting revenue from leaking to neighboring New Jersey. New York is considered one of the Big Four states that could add significant gambling revenue potential, along with California, Michigan and Florida. Michigan recently passed legislation allowing online sports betting. California and Florida have no imminent plans to do the same. Several states passed gambling laws in the last election cycle, lifting DraftKings, MGM and others as sports betting gains momentum in the country.
Ramsey says gambling stocks may also have been reacting to recent rumors that Texas might soon allow casinos. As one of the three most populous states in the nation, Texas could provide a boon to casino revenue. Sheldon Adelson, CEO of Las Vegas Sands (LVS), is reportedly behind the push to open casinos in Texas.
LVS stock fell 1.5% to 58.54, working on a 60.98 buy point.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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