Churchill Downs Preparing for Legalized Sports Betting, Closes at 52-Week High


Churchill Downs, Inc. (CHDN) has announced it will be acquiring casinos in Pennsylvania and Mississippi, as it prepares to capitalize on legalized sports betting. The company will buy the Presque Isle Downs & Casino in Erie, PA (for $178.9 million) and the Lady Luck Casino (for $50.6 million) in Vicksburg, MS, from current owner, Eldorado Resorts (ERI). Both PA & MS have passed sports betting legislation that would change their laws, should the SCOTUS strike down PAPSA. CHDN also owns brick and mortar casinos in Illinois, Kentucky and Louisiana, 3 other states actively working towards sports betting legalization.

Howie Long-Short: Churchill Downs released Q4 ’17 financials on February 28th. Q4 ’17 adjusted EBITDA was +23% YOY (to $37.6 million) on net revenue that rose 11% YOY (to $179.8 million). Changes to the recent U.S. tax code added $57.7 million to Q4 net income. CHDN shares are up 4.5% since the company issued their Q4 earnings report, closing at a 52-week high on Tuesday ($268.20).

Fan Marino: While Presque Isle Downs & Casino is among the lowest revenue generating casinos in Pennsylvania, it’s a significant acquisition for CHDN; PA recently legalized online gambling and the law passed covers mobile wagering on sporting events (assuming permitted by federal law). While land based casinos are profitable, it’s mobile sports betting that really has CHDN excited. TwinSpires, the company’s online horse betting platform, accounted for $256.7 million in ’17 revenue (+15% YOY). One can safely assume the company will look to turn their database of users betting on the ponies, into mainstream sports gamblers.

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