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Sports Gambling Stocks, Such as DraftKings, Drop Despite Michigan Legalization

As more and more states legalize internet sports betting, the moves by each state have had less of an impact on the market.
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Michigan Friday became the 15th state -- and the second-largest after New York -- to legalize online sports betting, but the news didn’t do much for sports gambling stocks, many of which fell.

As more and more states legalize internet sports betting, the moves by each state have had a reduced impact on the market. This was all expected when the Supreme Court legalized sports gambling in 2018.

DraftKings  (DKNG) - Get DraftKings Inc. Report shares recently traded at $52.70, down 1.61%; Penn National Gaming  (PENN) - Get Penn National Gaming Inc. Report, which has a 36% stake in Barstool Sports, traded at $106.94, down 0.23%; MGM Resorts International  (MGM) - Get MGM Resorts International Report traded at $31.67, down 0.43%; and Wynn Resorts  (WYNN) - Get Wynn Resorts Limited Report recently traded at $106.88, down 2.09%.

Online sports betting is a big business. In New Jersey, about 90% of all sports bets are made online, according to data cited by MarketWatch.

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Regarding Michigan, “its business-friendly tax rate and competitive licensing fees will attract operators, too,” betting analyst Dustin Gouker told MarketWatch. “And with a solid tribal and commercial casino infrastructure already in place, Michigan should be poised for quick success." The state may see a windfall of $40 million a year, he said.

As for MGM,” it remains positioned for the attractive long-term growth opportunities in Macau (22% of 2019 EBITDAR), U.S. sports betting, and Japan,” Morningstar analyst Dan Wasiolek wrote in a November commentary.

“In the U.S. (78% of MGM’s 2019 EBITDA), its 21 casinos are positioned to benefit from an estimated $6.2 billion sports betting market by 2024, generating about 4% of the company's total revenue that year.” He puts fair value at $28.