Is Churchill Downs A Sleeping Sports Betting Giant?
The global media juggernaut Insider Louisvilleran a story this week about Kentucky lining up legislation for sports betting legalization.
Not to kill the drama, but it’ll pass. Churchill Downs Incorporated (NASDAQ: CHDN) is headquartered in Louisville. Churchill Downs will reap the financial benefits of sports betting in Kentucky.
The broader question is: should Churchill be considered a sleeping sports betting giant in the U.S.?
Mo money, no problems
If you’ve followed Churchill stock the past five years, it’s done nothing but trend up.
They have cash on hand by the fistfuls. Outside of some online poker misfires, their M&A activity has been all Midas in touch.
One area that has stagnated in general over the past decade, however, is horse racing. It’s an old market that’s aging out.
However, Churchill’s online horse betting product, TwinSpires, has infrastructure almost as mature as their clientele. This is something David Katz, a gambling analyst for Jefferies, hits on in the Insider Louisville piece, noting that “the legalization of sports betting also represents a big opportunity for businesses, especially those with gambling infrastructure and experience, such as Churchill Downs.”
Churchill has already entered the sports betting market in Mississippi. However, Mississippi’s potential market size is comparable to its education system ranking. Let’s just say there are better spots to set up shop.
TwinSpires’ existing customer support, ability to handle high volume swings and general in-house expertise should provide it a leg up on potential competitors like DraftKings, who while innovative, basically operated like a fraternity house just three years ago.
Further, thanks in part to its blue chip brand and historical relevance, Churchill has serious political cajones. They could influence legislation at both local and federal levels to their liking if they flexed that muscle.
Down the stretch they’ll come?
Making the big pivot from horse racing to sports betting seems like the prudent path. Having an existing database of (horse racing) sports bettors can curtail some of the initial customer acquisition costs, and operational efficiencies would exist internally.
Churchill can partner with any platform or technology they’d like. They have the money.
After dipping their collective toe in the water in Mississippi and Kentucky, if they decide it’s time to make the leap, exert some legislative influence, and invest some capital, this is a market they could dominate.
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