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

NJ's Division of Gaming Enforcement released Aug sports wagering, online gaming, and casino (slot/table) revenue information today. Sports betting & iGaming profits together increased 92% y/y to $127m from $66m in 2015, down somewhat from 105/104% in July/June, but greater than March/April/May +10/ 43/78%. Including physical gambling establishment profits that declined (31 )% in Aug, all-in profits was down (7.5 )% to $326m, much better than July down (21 )%. As a suggestion, most NJ gambling establishments 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 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 deal with increased 112% m/m, which was lower than IN's up 140% (report), though NJ is more mature having introduced online in Aug '19 vs. IN Oct '19. With NJ gambling establishment traffic still low, we highlight that online sports betting handle increased 142% y/y vs. July 39%/ June down (27 )%/ May (55 )%/ April (79 )%/ March (45 )%. While we generally see the amount bet in Aug as favorable, we highlight outcomes benefitted from having NBA, MLB, and NHL playing vs. generally only MLB. We expect discounts (totally free bets) were also high. Amounts bet should remain strong in Sept offered all 4 big leagues will be playing vs. just the NFL and MLB last year. However, we are cautious Nov-Dec could soften as it will see simply 2 months of NFL and 1 month of NHL (possibly) 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 wagering revenue in line, with small share motions. Aug earnings 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 surpass our $101m 3Qe, but there's risk 4Q underperforms our $164m price quote (+50% y/y) with less 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 operates throughout numerous shared licenses.

iGaming remained 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 prior 3 months each up 123-124%. Revenue is now run-rating $1.1 B on an annualized basis vs. our 2020/2021 market estimates of $945m/$1.0 B, and 3Q is now tracking to $263m (straight-line) vs. MSe $260m. We had expected strong development from stay-at-home tailwinds however saw risk of more substantial deceleration due to enhancing 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 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 Acid Rock 7% vs. July 6%/ June 7%. We continue to believe the financial effect of COVID-19 paired with strong current iGaming leads to both NJ and PA ought to spur more states to legalize, though have seen more momentum for sports betting.

Still too early to read into casino outcomes. Aug casino revenue 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 however some reopened later e.g. Borgata 7/26, and 25% capacity limits/ lack of indoor dining stay considerable headwinds. By comparison, Las Vegas Strip gambling establishment earnings decreased (39 )% y/y in July after falling (61 )% in June after re-opening 6/4. Regional markets are carrying out much better, with MD July/Aug earnings down (6 )/( 3 )% after re-opening 6/19, OH July/Aug profits +12/ 5% after re-opening 6/19, and MO profits down (9 )/( 13 )% after re-opening 6/1, though IL July/Aug income decreased (29 )/( 26 )% after re-opening 7/1. In NJ, Ocean casino profits notably outshined with income up 1% y/y to $24m, while the other gambling establishments saw double-digit y/y profits decreases.