We recently compiled a list of the 11 Best Las Vegas Stocks To Buy Now. In this article, we are going to take a look at where Churchill Downs Incorporated (NASDAQ:CHDN) stands among the best Las Vegas stocks to buy now.
The gambling industry is growing throughout the globe, with the United States being one of the fastest-growing markets. According to the American Gaming Association, more American adults participated in some kind of gambling entertainment activities than ever during the past 12 months. The survey found that more than 55% of American adults participated in gambling, with 28% going to a physical casino while 21% placed sports bets.
One of the key findings of the report was regarding gambling becoming more acceptable within the American population. As per the association, 9 out of 10 adults found casino gambling acceptable for themselves and others as well. This is good news for the US economy and casino companies as they will generate substantial revenues from increased acceptability of gambling. The United States commercial gaming revenue increased 8.9% year-over-year to reach $17.63 billion during the quarter. Q2 2024, marked 14th consecutive quarter of growth and was driven by casino expansion in various states of the country, including Illinois, Virginia, and Nebraska.
Sports betting is one of the major contributors to the overall gambling industry. Let’s take a look at some of the recent trends in the sports betting industry.
What’s Happening in the Sports Betting Industry
It’s hard to think about sports without sports betting or gambling. The sports betting and gambling industry in the United States has exploded in the past 6 years since it became legalized in most states across the United States. Currently, 38 states have legalized gambling and the industry generated more than $120 billion in total bets and $11 billion in revenues for 2023 alone.
In one of the recent episodes of CNBC Boardroom’s Game Plan Sports Event, the executives of FanDuel, Fanatics, and Sportradar discussed the new state taxes and betting industry trends. All the executive members on the panel found that betters are more interested in placing wagers on individual players, along with placing real-time bets during the live sports event.
Moreover, the CEO of FanDuel overturned his decision to charge a gaming supertax from its customers after his competitors decided against charging any such tax. This came in a reaction after two US lawmakers introduced a bill to address sports betting at the federal level. In one of our recent articles on 10 Best Casino Stocks To Buy According to Analysts, we discussed how the upcoming taxes are expected to affect the market. Here’s an excerpt from the piece:
Illinois lawmakers are drafting a new budget that includes a sharp increase to the state tax on sports betting operators. On May 28, CNBC’s reporter Contessa Brewer mentioned that operators in Illinois have paid 15% on sports betting since it went live in June 2021. The new tax proposal is expected to increase the tax to a range of 20% to 40% depending on gross receipts, which means that the largest betting operators are expected to be attacked the highest with this increase.
The law is yet to be passed, but if it gets approved it will make Illinois’ highest tax rate the second highest behind New York and New Hampshire. For context, Illinois is the 4th largest state for sports betting and betters wagered more than $1.2 billion in March 2024 alone. Sports betting associations are not happy with the tax proposal. The CEO of one of the largest sports betting operators in the United States mentioned that the burden of this tax is going to shift to the consumers.
There is an upcoming tailwind which is expected to boost the industry further. The football season is back and the NFL is expected to spur a record $35 billion in legal sports betting. On September 3, CNBC reported that the United States will wage $35 billion this NFL season, marking a 30% increase since last year’s National Football League.
Much has changed since the last season. During the year states including Maine, North Carolina, and Vermont have allowed sports betting operations in their jurisdictions. Amidst the upcoming season, sports betting companies are feeling the heated competition and platforms are coming up with new strategies to capture more customers.
The president of FanDuel mentioned that the NFL season is one of the biggest acquisition periods of the year. The platform has partnered with YouTube and rolled out a “Sunday Ticket” offer, where players who bet at least $5 get a 3-week trial period to watch the NFL matches with Sunday Ticket. Moreover, as more than 95% of sports betting is happening online it presents an exciting opportunity for sports betting leaders to enhance their customer base and generate more revenues.
Our Methodology
To compile the list of 11 best Las Vegas Stocks to buy now we used the Finviz screener and ETFs. Using these two sources we first curated a list of 20 casino, gambling, and gaming stocks. Once we had the list, we then ranked these stocks based on the number of hedge funds holders during the second quarter. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Churchill Downs Incorporated (NASDAQ:CHDN)
Number of Hedge Fund Holders: 31
Churchill Downs Incorporated (NASDAQ:CHDN) is an online wagering, racing, and gaming entertainment company, whose popularity is nested in its flagship event called the Kentucky Derby. The Kentucky Derby racetrack owned by the company, hosts one of the longest continuously held annual events, which helps generate generous cash flow and margins for the company.
Churchill Downs Incorporated (NASDAQ:CHDN) operates through three major segments, one is evident as per our description of the company i.e. the Live and Historical Racing. Other segments include TwinSpires and Gaming.
Similar to its Live and Historical Racing segment, the Twinspires segment also contributes greatly to the company’s revenue by operating one of the largest wagering platforms in the United States. The segment contributing around 14% to the overall revenue has grown its adjusted EBITDA by more than 85% since 2018.
For the latest quarter, a strong performance across the board was led by the Live and Historic Racing segment, resulting in 36% revenue growth and 34% earnings growth year-over-year.
Churchill Downs Incorporated (NASDAQ:CHDN) has been growing its business presence through B2B strategic partnerships and acquisitions. It expanded pari-mutuel content and technology services to B2C sports betting platforms and also acquired Exacta, which provides HRM technology to third parties and reduces costs for the company.
Investors have shown confidence in management’s strategy to run the company. It was held by 31 hedge funds in Q2 2024, with total stakes worth $673.51 million. Citadel Investment Group is the top shareholder of the company, with total shares worth $166.8 million.
The London Company Mid Cap Strategy stated the following regarding Churchill Downs Incorporated (NASDAQ:CHDN) in its Q2 2024 investor letter:
“Churchill Downs Incorporated (NASDAQ:CHDN) – CHDN outperformed in 2Q as recent results exceeded expectations, and the 150th Kentucky Derby delivered growth above expectations as well. Additionally, in our view the value creation from recent acquisitions is becoming clearer to the market. We continue to view CHDN as a high-quality business run by a management team with a track record of astute capital allocation and a strong pipeline of opportunities for continued growth.
Increased: Churchill Downs (CHDN) – The increase reflects our confidence in the long-term outlook for the business and our desire to reduce cash in the portfolio.”
Overall CHDN ranks 10th on our list of the best Las Vegas stocks to buy now. While we acknowledge the potential of CHDN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure. None. This article was originally published on Insider Monkey.
