Morgan Stanley Reaserch: New Jersey sports betting handle increased 128% y/y on a jam-packed calendar vs. July +25%/ decreases March-June. iGaming earnings grew 114% however slowed from current months. Sports betting revs will likely beat our 3Q est however lack 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 gaming, and gambling establishment (slot/table) earnings data today. Sports wagering & iGaming income together increased 92% y/y to $127m from $66m last year, down a little from 105/104% in July/June, but greater than March/April/May +10/ 43/78%. Including physical casino earnings that decreased (31 )% in Aug, all-in revenue was down (7.5 )% to $326m, much better than July down (21 )%. As a pointer, a lot of NJ casinos re-opened 7/2 with 25% video gaming capacity/no F&B. We highlight CZR and WMH as our favored plays on the nascent US sports betting/ iGaming opportunity, where we see more undiscovered worth.

New record for sports betting 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 actually increased only 25% in July (to $315m), while June was down (40 )%/ May (63 )%/ April (83 )%/ March (51 )%. Aug manage increased 112% m/m, which was lower than IN's up 140% (report), though NJ is more fully grown having launched online in Aug '19 vs. IN Oct '19. With NJ casino traffic still low, we highlight that online sports betting manage increased 142% y/y vs. July 39%/ June down (27 )%/ May (55 )%/ April (79 )%/ March (45 )%. While we normally view the amount bet in Aug as favorable, we highlight results taken advantage of having NBA, MLB, and NHL playing vs. typically just MLB. We expect promotions (complimentary bets) were also high. Amounts bet should remain strong in Sept given all 4 big leagues will be playing vs. just the NFL and MLB in 2015. However, we beware Nov-Dec might soften as it will see just 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 major sports leagues playing through YE vs. 12 last year.

Sports wagering income in line, with small share motions. Aug profits was $40m, growing 57% y/y, reflecting 6% hold (vs. Aug '19 9%/ historical avg 7%). Revenue was above July $30m (9% hold), June $13m (8% hold) and Aug '19 $25m (9% hold). NJ sports wagering earnings of $66m over the past two months suggests NJ will likely exceed our $101m 3Qe, however there's threat 4Q underperforms our $164m 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 throughout several shared licenses.

iGaming stayed strong. NJ iGaming revenue 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 actually expected strong development from stay-at-home tailwinds however saw risk of more substantial deceleration due to improving physical casino traffic driving churn of March-July sign-ups. NJ iGaming profits is now $598M YTD, up 101% y/y, and $783m TTM, up 93% y/y. Market shares were relatively similar m/m, with the exception of Golden Nugget (incl. FanDuel) falling 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 financial impact of COVID-19 combined with strong recent iGaming leads to both NJ and PA ought to stimulate more states to legislate, though have actually seen more momentum for sports wagering.

Still too early to read into casino results. Aug gambling establishment profits declined (31 )% y/y to $199m, was lower on an outright basis vs. July $147m, though July was down (47 )%. Casinos re-opened on 7/2 but some reopened later on e.g. Borgata 7/26, and 25% capability limitations/ lack of indoor dining stay significant headwinds. By comparison, Las Vegas Strip gambling establishment profits declined (39 )% y/y in July after falling (61 )% in June after re-opening 6/4. Regional markets are performing far 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 income especially exceeded with revenue up 1% y/y to $24m, while the other casinos saw double-digit y/y revenue declines.