The Super Bowl is coming - Las Vegas casinos and sportsbooks may have already won

The 2024 Super Bowl is setting up to be a jackpot for the Las Vegas Strip and sports betting operators. The perfect mix of sports betting legalization in new states and a high-interest game featuring the Kansas City Chiefs and San Francisco 49ers has some forecasters predicted legal wagers could top $1.35B across the 39 regulated markets. Notably, this year's Super Bowl will mark the first time that legal Super Bowl bets will be made in Florida. Other states in the betting mix this year include Massachusetts, Kentucky, Maine, Vermont, and Nebraska. Legal Sports Report previewed that depending on how those tickets settle, U.S. sports betting operators stand to win north of $100M on Super Bowl 58. Whether or not Taylor Swift is overexposed is a separate question from the fact that the superstar is moving the needle with sports betting. Props bet volume on the Super Bowl has soared to record levels already at major sportsbooks, with action involving Taylor Swift and Kansas City Chiefs star Travis Kelce a significant factor. Weighing on the wildcard, Tipico sportsbook manager Sunny Gupta told Front Office Sports that the sportsbook is trying to "play into the Taylor Swift effect" because of the additional Swifties tuned in and expects a larger handle. In general, sportsbooks have a higher hold rate on prop bets than normal action on the Super Bowl.

The Super Bowl is taking place in Las Vegas and will throw an extra spotlight on the Strip. Hotel room rates have soared in Las Vegas since the Kansas City Chiefs and San Francisco 49ers nailed down the two spots in the Super Bowl to continue a strong trend since November despite the opening of the high-profile Fontainebleau Las Vegas, which added new room supply. The Nevada Gaming Control Board recently reported that Las Vegas Strip GGR was up 11% year-over-year in December to a record tally of $905M, with baccarat still a major profit center for the casinos. Of interest to investors, numbers have also been very solid for the Las Vegas Locals market. Looking ahead, the convention calendar is very strong for the Las Vegas Strip, and all indications are that high-end consumers are not pulling back on Vegas expenditures. NFL football, F1 Racing, Sphere (SPHR) concerts are also expected to be major draws to the region once again this year. The list of stocks that could see an incremental boost from all the attention on Las Vegas includes Red Rock Resorts (RRR), VICI Properties (VICI), Golden Entertainment (GDEN), Hilton Worldwide (HLT), and Bally's Interactive (BALY).

On Wall Street, Morgan Stanley warned near-term margins could feel some pressure from ramping promotions from several existing and newer businesses (BetMGM, ESPN Bet, Fanatics (FANA)) looking to reinvigorate market share and narrow the competitive moat to the established leaders. "However, the results of 2023 suggest that permanent inroads may be more challenging as share leaders have been able to create a flywheel where increasing market share and win rates have provided firepower to reinvest in product and promotion," observed analyst Stephen Grambling. While some market share choppiness is expected over the next 12-18 months, Morgan Stanley's long-term view of the overall market share dynamics is largely unchanged with FanDuel (OTC:PDYPY) and DraftKings (NASDAQ:DKNG) seen being at the top - followed by BetMGM (NYSE:MGM), Caesars Sportsbook (CZR) and ESPN Bet (DIS). Taking a wider view, Oppenheimer estimate the U.S. legal online sports betting market will grow another 25% in 2024 to $15.8B as more states regulate digital wagering.

Watching downloads

The top sports betting by iOS downloads over the last ten weeks (in order) are FanDuel (FLUT), DraftKings (DKNG), Hard Rock, ESPN Bet, Betr, BetMGM (MGM), Bet365, Caesars (CZR), Fanatics (FANA), and PointsBet (OTCQX:PBTHF).

A new player

Flutter Entertainment (FLUT) began trading on the New York Stock Exchange last week and stopped trading on Euronext Dublin. A proposal to move the primary listing from the London Stock Exchange to the NYSE will go to shareholders at the company's next annual meeting. Some analysts think a primary listing in the U.S. could raise the profile of the entire sports betting sector.

The catch-all

The Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ) is one way to play the sports betting and iGaming sector in a broad way. Top holdings include Flutter Entertainment (FLUT), DraftKings (DKNG), Evolution AB (OTCPK:EVVTY), Entain Plc (OTCPK:GMVHF), Kindred Group (OTC:KNDGF), Churchill Downs (CHDN), and Sportradar (SRAD).

A potential sleeper

Cathie Wood's ARK Invest has been a bigger buyer of Genius Sports (GENI) over the last week to add to its GENI position in the ARK Next Generation Internet ETF (ARKW). Genius Sports was profiled favorably by Seeking Alpha analyst Stephen Tobin.