Gaming and entertainment companies Activision Blizzard (ATVI) and MGM Resorts (MGM) report earnings on Thursday, August 2. Here’s a look at what might be expected from their quarterly reports.
Earnings season continues with results coming up from MGM Resorts (MGM) and Activision Blizzard (ATVI). MGM reports earnings before market open on Thursday, August 2, and ATVI reports after market close the same day.
In May, the U.S. Supreme Court struck down a 1992 federal law that had banned most states from allowing sports betting. Once that decision went through, the gaming industry was off to the races to lay the groundwork for expanding operations.
Currently, there are 18 states with active sports-betting legislation, according to the American Gaming Association (AGA), which was a proponent for overturning the federal ban. The AGA estimates that more than $150 billion is wagered illegally in the U.S. each year, so the hope seems to be that a greater portion of that money will flow to state-sanctioned operations. In the past few months, several states have already introduced legislation to allow sports betting in the future.
MGM’s management has already announced several steps towards expanding its sport betting operations following the Supreme Court decision. Though it was after the end of the second quarter, MGM just announced a new NBA partnership where it will become the league’s first official gaming partner. Right before that, MGM also said it was forming a 50/50 joint venture with London-based GVC Holdings to create a sports betting and online gaming platform in the U.S.
While MGM’s sports betting plans are likely to be a topic of discussion on the earnings call, the company’s casinos and properties might be the primary focus among analysts. For Q2, MGM is expected to report adjusted EPS of $0.26, down a penny from last year, on revenue of $2.96 billion, according to third-party consensus analyst estimates. Revenue is projected by analysts to increase 12.2% year over year.
Management said it continues to expect disruptions as its Monte Carlo location in Las Vegas is converted into the Park MGM/NoMad, which MGM has said it expects to be completed towards the end of the year. The absence of a major boxing match in Vegas this past May is another factor that management said will impact second-quarter results. Net revenues are expected to be up slightly, while revenue per available room is projected to grow 1% to 3%, according to the company.
In terms of new locations, the MGM Cotai in Macau just opened in February this year, so this will be the first full quarter with that location’s results. And the MGM Springfield in Massachusetts is scheduled to open in a few weeks. After that, most of the company’s major construction projects will be completed.
Around ATVI’s upcoming earnings release, options traders have priced in a 5% stock move in either direction, according to the Market Maker Move indicator. Implied volatility was on the high end at the 64th percentile as of this morning.
In short-term trading at the August 3 weekly expiration, recent activity for both calls and puts has been spread out across a range of strikes. There hasn’t really been any strikes with recent activity that stands out. Open interest is highest at the 75 and 77.5 strike puts, with a little over 3,700 contracts open at each of those strikes.
At the August 10 weekly expiration, the at-the-money 74 strike call has seen heavier trading recently. And in a few weeks at the August 17 monthly expiration, calls have been active at the 75 and 77.5 strike prices, while puts have been active at the 75 strike.
On the economic data front, the big thing coming up is July’s employment report, due out Friday morning. And there are plenty of companies scheduled to report earnings coming up:
For a look at what else is going on, check out today’s Market Update if you have time.
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