It’s the time of the year for window dressing and the folks over at Bank of America Merrill Lynch (Merrill) are suggesting that the stocks of British bookmaker William Hill are already ripe for plucking.
The international financial investment institution has given the stocks of William Hill a “buy” rating from “underperform,” its biggest upgrade in more than three months that helped propel it toward the top of the FTSE 250, according to The Evening Standard.
Most investors are wary of making a bet not only on William Hill but also on other bookies, especially after the British government launched a crackdown on fixed-odds betting terminal (FOBTs).
The UK Department for Digital, Culture, Media and Sport (DCMS) is conducting its 12-week consultation on the sector and investors expressed fears that a potential reduction in maximum stakes to just £2 will cost the industry as much as £639 million a year and a whopping £5.5 billion over 10 years.
Merrill, however, urges investors to look way beyond the DCMS consultation since Hills’ shares have already priced in the worst-case scenario of a £2-per-spin cap on roulette machines.
The brokerage firm told investors to focus on the developments in the U.S., where the issue of the federal sports betting ban will now be tackled by the Supreme Court.
At this moment, only Nevada is allowed to offer single-game sports betting. The ban is currently being challenged by New Jersey before the high tribunal.
Should DCMS decide to impose a £2 cap on FOBTs, Merrill pointed out that the U.S. market could offer William Hill a lifeline. The financial investment firm pointed out that William Hill dominate sports betting in Nevada with a 55 percent share of the market and this will grow even bigger if the Supreme Court decides in favor of New Jersey.
“Even if William Hill lost market share it could prove to be a very large driver of growth,” the brokerage firm said.