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MGM Announces Plans to Open New Jersey’s 1st On-Site Sportsbook at the Borgata Casino
The Supreme Court is going to hear arguments on December 4th surrounding New Jersey’s right to legalize sports gambling and there seems to be a foregone conclusion that the SCOTUS will rule in the state’s favor before the end of June 2018. MGM Resorts International (MGM) seems particularly confident, announcing its intention to become the first casino in the state with an on-site sportsbook. At last week’s Sports Betting USA Conference, Jay Hood, the company’s VP of Race and Sports, said development has begun on a $7 million sportsbook at the Borgata hotel and casino in Atlantic City. But ESPN gaming writer David Purdham isn’t convinced we’re going to see legalized gambling in 2018, placing odds on the high court siding with New Jersey at -$110 (or just 53.5%).
Howie Long-Short: Experts have estimated a legalized sports gambling industry could be worth $150 billion, but Monmouth Park owner Dennis Drazen believes that number to be as high as $400 billion. Either way, Drazen (and William Hill) is prepared to cash in once the Professional and Amateur Sports Protection Act of ‘92 is appealed. Back in ’11, when NJ voters approved sports betting legislation, Drazen partnered with William Hill (OTC: WIMHY) on a sportsbook at Monmouth Park. That property, which was turned in to a sports bar, is currently being converted back to its intended use. Drazin said the Monmouth Park sportsbook could open within weeks of a SCOTUS decision.
Fan Marino: Give DraftKings credit for being creative in finding ways to engage fans. The company recently partnered with MSG Networks (MSGN) on a live fantasy show that ran parallel to a Knicks game broadcast and as of Q1 2018, will be airing select Euroleague games within their mobile app; enabling fans to flip between their fantasy contest and a live game broadcast. Unfortunately for those invested in daily fantasy, legalized gambling is set to put the industry out of business. In-game betting is going to replace it.
Foot Locker Shares Experience Largest Single-Day Percentage Gain in Company History
Foot Locker (FL) shares gained 28% on Friday, their largest single-day percentage gain ever, following the announcement of better than expected Q3 financials. The market responded overwhelmingly positive, despite a drop in YOY revenue (-.08% to $1.87 billion), same-store sales (-3.7%) and earnings per share. CEO Dick Johnson said the company will focus on its digital efforts to reenergize the business, believing that speeding up customer access to inventory is a way to maintain market share. FL is also banking on a NKE rebound, saying that company is “on the verge of a major breakthrough in terms of product innovation and customer engagement.”
Howie Long-Short: The best single day in shareholder history seems to indicate the company’s turnaround is nearly complete, but the financials don’t reflect that. FL says that basketball is on the rebound, kids’ sales are positively trending and the company is experiencing growth within its apparel line; but I’m not sure that news warrants the gains experienced. The company remains a middle man placing their eggs in NKE’s basket; a company that foresees their future in DTC business. Shares remain down 43% YTD. It’s worth noting that Finish Line (FINL) shares popped 7% following FL’s earnings beat.
Fan Marino: NKE is promoting a shoe that can make the wearer 4% more efficient when running. The Zoom Vaporfly 4% uses a light-weight foam found in airplane insulation and a small carbon fiber plate, shaped like a spoon (propels the runner forward), to provide the optimal balance of performance and weight. Does it work? Runners World tested the shoe and gave it “the highest values ever assigned in our lab”, but George Wu, a researcher at the University of Chicago Booth School of Business ran a study indicating the shoes decreased finishing times. I’m going to need more convincing before I spend $250 to shave 4% off my 12-minute mile.
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Ferrari Contemplates Exit from Formula One, Could Save $119 Million/Year
Ferrari (RACE) could be leaving Formula 1 (FWONK) at the expiration of their contract following the 2020 season. RACE, F1’s oldest team (67 seasons), opposes the organization’s plan to introduce a new version of its engine to the racing series and its intention to redistribute prize money beginning with the 2021 season. The introduction of a new engine will increase RACE’s expenses and a balancing of prize money would likely cost the company its guaranteed annual bonus payment ($94 million/year). Ferrari Chairman Sergio Marchionne has been quoted as saying an exit would be “totally beneficial” to Ferrari’s bottom line.
Howie Long-Short: There is a narrative that should RACE pull out of Formula 1, the company would see an increase of $119 million to its bottom line; the team’s annual deficit. I don’t believe the number is nearly that high. Marchionne has already said that if the company were to leave F1, it would join another racing circuit. Even if you believe F1 R&D is irrelevant to the development of Ferrari street road vehicles (and theoretically draw the expenditure down to $0), competing on another circuit is going to require some level of R&D capital. An exit from F1 may reduce the required spend, but it doesn’t eliminate line item.
Fan Marino: Red Bull team principal Christian Horner is calling Ferrari’s bluff saying, “they’ll bluster that they don’t need Formula One, but what other form of motor racing is going to give Ferrari the platform that Formula One does? I think when the music stops they’ll be there.” He may be right as to the latter, but Ferrari doesn’t need F1 as a marketing platform; and certainly, not like F1 needs Ferrari. As well-respected motorsport journalist Peter Windsor recently said “the key to everything in Formula 1 is keeping Ferrari happy and part of the programme. Without Ferrari, Formula 1 is just another motor racing championship”. In that scenario, Ferrari would form its own racing circuit (and likely not miss a beat).
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JohnWallStreet is not a person or location, but a destination for the educated sports fan.
While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related finance news, in easily digestible bites, with commentary from both the equities analyst and sports fanatic perspectives.
We’ll cover publicly traded professional teams & stadiums, television networks, apparel & footwear companies, equipment companies, ticketing companies, content and facilities providers. If it trades on Wall Street, and has a sports angle, it’s in our wheel house.
Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star, blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.