For investors, U.K. companies appear to offer a particularly good way to ride this development, as some had prepared for the ruling and boast considerable U.S. operations. Gambling companies William Hill WMH, +0.15% , GVC Holdings GVC, +1.14% and 888 Holdings 888, -0.06% are among the names that bulls view as due for gains. Their stocks popped on the ruling, but there still could more upside.
How's this for a head start? William Hill already runs 108 of the 192 sports books in Nevada, and it's the risk manager for sports betting within the Delaware lottery. Deutsche Bank analyst Carlo Santarelli trots out those facts in a recent note, saying the London-based company's global scale should ensure profit margins that top American rivals'.
“When considering the cash-flow waterfall from a sports book at a regional casino, one must consider that there are many hands in the till,” Santarelli writes. And one of those hands will be from a company that's “managing the day-to-day functions of the book itself,” he says.
While William Hill shares surged 11% Monday on the court's decision, that priced in only 30% of the “potential value creation,” reckons Berenberg's Roberta Ciaccia. The analyst says that estimate comes from number-crunching that assumes the company nabs 10% of the U.S. sports-betting market by 2023. Her calculations suggest that Sportingbet parent GVC's jump of more than 7% Monday priced in just 40% of its possible upside, but that Paddy Power Betfair's PPB, +2.32% 12% climb factored in almost all of its potential lift. Berenberg rates Isle of Man–based GVC as a Buy, Ireland-based Paddy Power as a Sell, and William Hill as a Hold.
“Sentiment about the U.S. news will overshadow any possible negative impact from new gaming machine limits” in U.K. betting shops, she adds.