Internet Gambling Has Bright Future Says Morgan Stanley

Internet Gambling Has Bright Future Says Morgan StanleyJust about everyone has heard of Morgan Stanley. For those that haven’t Morgan Stanley is a financial services company based in New York. The company operates in 42 countries and has $304 billion in assets under its control or supervision. The company operates in three business sectors Institutional Securities, Global Wealth Management and Asset Management. Morgan Stanley is respected in financial markets around the globe. Recently Morgan Stanley predicted that by 2020 online gambling in the United States will generate revenues as large as those currently produced by land based gambling in Las Vegas and Atlantic City combined.

Morgan Stanley estimates a $9.3 billion online gaming market in 2020. The Las Vegas strip produced $6.2 billion and Atlantic City produced $3 billion last year. The company added “we believe our market estimates are conservative.” Boyd Gaming is currently a hot stock. According to a report in the financial publication Barron’s “We view BYD as best positioned stock in our US coverage to benefit from the US online gaming opportunity given its positioning and relative size. BYD currently has a $710 million market cap, is 7x levered, and we expect it to generate $634 million of 2013 EBITDA. The other well positioned operator in our coverage for online is MGM Resorts International (MGM) but it has a market cap of ~$6 billion and we expect it to generate ~$2 billion of EBITDA in ‘13e, making online less of a driver.”

Some are doubting Morgan Stanley’s predictions because of their association with the ill-fated Revel casino and hotel in Atlantic City. According to one report “In 2010 Morgan Stanley took a 98% write-down of its $1.2 billion investment in a proposed $2.6 billion Atlantic City Casino [Revel]. Because of the downturn in Atlantic City, Morgan Stanley decided it was better to sell its stake in the property than to ‘throw good money after bad.” The Revel project turned out to be a public relations nightmare for Morgan Stanley. Morgan Stanley received tax rebates on the Revel project and many New Jersey residents viewed the rebates as a prime example of corporate cronyism.

Unions didn’t like the Revel project either. They claimed that instead of creating new jobs it would take away jobs from existing casinos. In 2010 Morgan Stanley took a 98% write down on the Revel project. Despite the naysayers there can be no doubt that internet gambling has a bright future in the United States.

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