Are you interested in owning the next big thing? Then you may want to consider the online betting market. And for those wanting a piece of the action, there are a number of stocks in the market ready to trade.
Most of us would love to own the next Netflix (NASDAQ:NFLX) or Amazon (NASDAQ:AMZN). They’re industry leaders that have produced massive returns for their shareholders over time. And though both have come a long way, investors should remember these companies were once first-movers in new and emerging markets way back when. Right now online gambling companies positioned for the legalization of sports betting and other sinful wagers on U.S. soil, offer similar potential.
Of course, ‘potential’ is just that. The 1000x growth of a stock like AMZN or NFLX from initial public offering to worldwide titan is never so simple as being “first.” And, as early shareholders in either company can tell you, there were serious declines and setbacks from IPO to current valuations.
Investors looking for the next big thematic trade also need to realize there are no guarantees, just early leaders and tantalizing growth narratives of exciting new markets. Right now that’s best exemplified by the cannabis market’s fall from favor and subsequently cratered valuations. They should bounce back, right?
With those serious caveats noted, there’s still plenty of reason to be optimistic about these 3 online gambling stocks to trade:
With sports betting only legalized in the U.S. in 2018 and still underexploited at the state level, there’s a huge market for online gambling companies to see massive scaling. Publicly-listed online gambling companies have only recently begun gaining traction on Wall Street, so there’s plenty of opportunity here.
Online Gambling Stocks to Trade: DraftKings (DKNG)
Source: Charts by TradingView
The first of our online gambling companies to consider is DraftKings. For today’s investors in a burgeoning online sports market, there may be no better positioned property than DKNG stock.
DraftKings has a partnership with the NFL and maintains a huge base of customers playing in Daily Fantasy Sports leagues across 43 states in the U.S. Those opportunities should come in handy as states begin rolling out the red carpet for legalized sports betting in the months and years ahead.
At a market cap nearing $12 billion and an eyewatering price multiple of almost 700, DKNG may seem expensive. But like any company at the forefront of a secular growth market, shares are priced accordingly.
Technically, for those that want a piece of the action today, this online gaming stock is forming an oversold corrective base that could ultimately take on a ‘W’ pattern.
Those bulls who prefer swinging for the fences might consider buying a confirmed pivot low, if it happens, in the next few sessions. Whichever way you play the game though, I’d advise a limited risk spread or outright call option purchase on DraftKings stock for positioning.
Penn National Gaming (PENN)
Source: Charts by TradingView
Penn National Gaming is the next of our online gambling stocks to trade. Unlike our other stocks, Penn has been around for decades. The company owns and manages traditional gaming and racing properties and operates video gaming terminals with an emphasis on slot machines. But now Penn has a new angle on winning big for investors.
Today’s and tomorrow’s jackpot could be Penn’s investment in online sports betting outfit Barstool Sports. Barstool is big with younger millennial bettors. And the investment could pay off in more ways than just big dividends for this online gambling stock’s existing retail sports book.
Technically, shares of PENN have formed a corrective cup base with a ‘high’ handle consolidation on the weekly price chart. The smallish pullback has a confirmed low in place. However, follow-through has faltered and stochastics have bearishly crossed over in overbought territory.
I’d recommend putting this online gambling stock on the radar for a ‘second-attempt’ purchase above $34.66, which will confirm the pattern pivot. That price action should also be confirmed by a bullish stochastics crossover.
Investors may wind up paying more using this strategy, but I think the peace of mind is worth the price hike. If PENN falters at that price level, all bets are off the table until a larger correction emerges.
GAN Ltd (GAN)
Source: Charts by TradingView
The last of our three online gambling stocks to trade are shares of GameAccount Network. GAN is a London-based SaaS or software-as-a-service solutions provider for this emerging market. The company’s niche has been likened to Shopify’s (NYSE:SHOP) as it allows brick-and-mortar operations to easily take their gambling business online or Roku’s (NASDAQ:ROKU) key turf within the streaming video market.
GameAccount Network is the smallest of our three online gambling stocks with a valuation of just under $700 million. It’s also very new to Wall Street’s betting parlor as shares went public less than two months ago and is flirting with profitability.
Technically, the trend for online betting looks like smooth sailing if GAN’s early price action is to be believed. Since May shares have put together a constructive uptrend. Now this online gambling stock has just finished confirming a simple five-day pullback off fresh all-time-highs. It looks like a sure thing, doesn’t it?
My recommendation, hedging in case GAN fails to pop, at least in the near future, is to buy the October $25 / $35 bull call spread for $2.75. Regardless of the individual outcome, this vertical looks like a stronger-suited way to play the game.
Disclosure: Investment accounts under Christopher Tyler’s management does not own any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.