The Stars Group (TSG)
Online gambling company The Stars Group (TSG) is looking for help from governments — not worried about harm. The acquisition of Sky Betting & Gaming made it a key potential beneficiary of sports betting legalization in the U.S. But cyclical worries in the gaming space have led TSG stock — perhaps surprisingly — to selloff sharply since federal courts paved the way for state-level legalization.
The Stars Group clearly sees a huge opportunity, however. It was announced as the official gaming operator of the NBA last week. It made a deal with regional casino operator Eldorado Resorts (ERI) to run online betting in 11 states should legalization arrive. With the legacy poker business stagnant, and international expansion largely complete, TSG needs new U.S. markets to jumpstart growth.
So The Stars Group needs legalization, but more specifically, it needs online legalization. Online casino gambling growth remains stalled out, with Pennsylvania last year becoming just the third state to authorize online casino gambling. (Nevada allows online poker only.)
Online sports betting remains largely unavailable so far as well. Without help in the U.S., TSG might still be cheap, with a forward price-to-earnings ratio under 7 despite decent growth of late. If online gambling and online sports betting finally expand stateside, however, TSG could be a steal.
