How Big Can Online Gaming Really Be?: Boyd Gaming Corporation (BYD) and More

Boyd could generate upside in Atlantic City and it has huge potential if there’s a national bill eventually. Boyd has teamed up with MGM Resorts and Bwin.Party to form a dynamic partnership if poker becomes legal nationally. Bwin.Party would own 65% of the partnership, with MGM owning 25% and Boyd owning the remaining 10%. In an analysis I did last year, I predicted that Boyd could easily generate $120 million in EBITDA from online poker alone in this partnership, a much bigger impact given its small size than the much larger MGM would have.

Game makers would also be big winners. WMS Industries (Scientific Games’ new acquisition), Bally Technologies, International Game Technology, and Shuffle Master have been approved to make online poker games in Nevada. A national network is just a step away. These companies would run games on behalf of casino companies, or that’s how it would work under the Nevada model. Zynga Inc (NASDAQ:ZNGA) is an outsider with an eye on the market as well.

Who loses?
Ironically, if online gaming is legalized in Atlantic City or nationally, one of the losers may be Las Vegas Sands Corp. (NYSE:LVS) , one of the most successful brick-and-mortar casino companies. CEO and majority owner Sheldon Adelson despises online gaming and has lobbied against it in the past. Of course, he could change his mind, but with a relatively small network of casinos it would be hard to compete with larger rivals.

Foolish bottom line
Online gaming could be huge for gaming companies, but let’s not get carried away. We’re a long way from online games generating $1 billion in revenue or $300 million in EBITDA for any company. For companies like Caesars, MGM, and Boyd, this could be what they need in order to shoot higher on the stock market. But until we have something more than gaming in Atlantic City, I’m not going to bet on these companies based on online games alone.

The article How Big Can Online Gaming Really Be? originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. The Motley Fool has no position in any of the stocks mentioned.

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