Morgan Stanley Reaserch: New Jersey sports wagering manage increased 128% y/y on a jam-packed calendar vs. July +25%/ decreases March-June. iGaming revenue grew 114% however slowed from recent months. Sports wagering revs will likely beat our 3Q est however absence of major sports in Nov/Dec suggest year in line. Casino revs fell (31 )% vs. July (47 )%.

NJ's Division of Gaming Enforcement released Aug sports wagering, online betting, and gambling establishment (slot/table) income information today. Sports betting & iGaming profits together increased 92% y/y to $127m from $66m in 2015, down a little from 105/104% in July/June, however higher than March/April/May +10/ 43/78%. Including physical casino income that decreased (31 )% in Aug, all-in earnings was down (7.5 )% to $326m, better than July down (21 )%. As a pointer, a lot of NJ gambling establishments re-opened 7/2 with 25% gaming capacity/no F&B. We highlight CZR and WMH as our preferred plays on the nascent US sports betting/ iGaming opportunity, where we see more undiscovered value.

New record for sports wagering volumes. NJ's Aug sports wagering deal with increased 128% y/y to $668m, setting a brand-new record vs. $563m in Nov '19. Handle had increased just 25% in July (to $315m), while June was down (40 )%/ May (63 )%/ April (83 )%/ March (51 )%. Aug handle increased 112% m/m, which was lower than IN's up 140% (report), though NJ is more mature having actually launched online in Aug '19 vs. IN Oct '19. With NJ casino traffic still low, we highlight that online sports betting deal with increased 142% y/y vs. July 39%/ June down (27 )%/ May (55 )%/ April (79 )%/ March (45 )%. While we typically see the quantity bet in Aug as positive, we highlight results taken advantage of having NBA, MLB, and NHL playing vs. generally just MLB. We expect promos (complimentary bets) were likewise high. Amounts wagered must stay strong in Sept provided all 4 significant leagues will be playing vs. simply the NFL and MLB in 2015. However, we beware Nov-Dec could soften as it will see simply 2 months of NFL and 1 month of NHL (potentially) vs. NBA, NFL, and NHL all playing last year. Net-net, there are 11 more cumulative months of the 4 significant sports leagues playing through YE vs. 12 last year.

Sports betting profits in line, with small share movements. Aug income was $40m, growing 57% y/y, reflecting 6% hold (vs. Aug '19 9%/ historic avg 7%). Revenue was above July $30m (9% hold), June $13m (8% hold) and Aug '19 $25m (9% hold). NJ sports betting revenue of $66m over the previous 2 months suggests NJ will likely exceed our $101m 3Qe, but there's threat 4Q underperforms our $164m price quote (+50% y/y) with fewer significant sports in session. In Aug, FanDuel-Pointsbet-Meadowlands reported 54% market share, up from July 48%/ June 48%/ YTD 51%, while DraftKings-FOX Bet-Resorts published 25% vs. July 28%/ June 31%/ May 38%/ YTD 29%. It appears William Hill held its share at ~ 10%, though it runs across several shared licenses.

iGaming remained strong. NJ iGaming earnings was $88m in Aug, up somewhat vs. July $87.5 m/June $85m/May $86m, though development was slightly lower at up 114% y/y vs. the previous 3 months each up 123-124%. Revenue is now run-rating $1.1 B on an annualized basis vs. our 2020/2021 market quotes of $945m/$1.0 B, and 3Q is now tracking to $263m (straight-line) vs. MSe $260m. We had anticipated strong development from stay-at-home tailwinds but saw threat of more considerable deceleration due to improving physical gambling establishment traffic driving churn of March-July sign-ups. NJ iGaming revenue is now $598M YTD, up 101% y/y, and $783m TTM, up 93% y/y. Market shares were reasonably comparable m/m, with the exception of Golden Nugget (incl. FanDuel) being up to 32% (from July 36%/ June 34%). Resorts (incl. DKNG) had 20% share vs. July 21%/ June 20%, Caesars 11% vs. July 11%/ June 10%, Tropicana 7% (in line with July/June), and Hard Rock 7% vs. July 6%/ June 7%. We continue to believe the economic impact of COVID-19 coupled with strong recent iGaming leads to both NJ and PA should stimulate more states to legalize, though have actually seen more momentum for sports betting.

Still prematurely to read into casino results. Aug gambling establishment earnings declined (31 )% y/y to $199m, was lower on an absolute basis vs. July $147m, though July was down (47 )%. Casinos re-opened on 7/2 but some resumed later e.g. Borgata 7/26, and 25% capability limitations/ lack of indoor dining remain substantial headwinds. By comparison, Las Vegas Strip casino income decreased (39 )% y/y in July after falling (61 )% in June after re-opening 6/4. Regional markets are performing much better, with MD July/Aug profits down (6 )/( 3 )% after re-opening 6/19, OH July/Aug revenue +12/ 5% after re-opening 6/19, and MO profits down (9 )/( 13 )% after re-opening 6/1, though IL July/Aug earnings declined (29 )/( 26 )% after re-opening 7/1. In NJ, Ocean casino earnings especially outshined with earnings up 1% y/y to $24m, while the other gambling establishments saw double-digit y/y profits decreases.