Earlier this year, many of us tuned into stories about a mysterious disease that began killing thousands of people in China. Later, that morbid curiosity transitioned rapidly into outright fear as the novel coronavirus made its way onto American shores. When the crisis finally became “real,” the last thing anybody wanted to do was go out and travel. Not surprisingly, gambling stocks took a beating under this terrifying reality.
But as we gradually become acclimatized to the new normal, there’s a growing case for contrarianism. One of the most significant signs for optimism is the reopening of Las Vegas, the mecca of gambling stocks. Of course, this isn’t quite the Sin City that we’ve all come to know and perhaps love. But the very fact that it has reopened its doors is a much-needed catalyst for the gaming sector.
Another factor that plays into bullishness in gambling stocks is the resumption of professional sports leagues. Although it seemed to occur without much fanfare — note that I’m hardly a useful arbiter since I rarely watch sports nowadays — the Los Angeles Lakers won the 2020 NBA Championship. Further, the Los Angeles Dodgers will play in the World Series. Such distractions have been positive for overall public sentiment, as well as the gaming industry.
Further, I believe there’s a political element in play that could possibly help those wishing to speculate on gambling stocks to buy. As you know, it’s looking increasingly likely that former Vice President Joe Biden will win the November election. Notably, rapper 50 Cent — affectionately known as “Fitty” — mentioned that he was supporting incumbent President Donald Trump.
The reason? Fitty doesn’t like that Biden intends to tax the snot out of rich people. And that’s the polite version. We could see many people leaving blue states and into tax-friendly red (or reddish) states like Nevada. Such a move could bolster the Las Vegas economy beyond gambling, attracting talent across multiple sectors. Potentially, this could help the broader economy, increasing discretionary income that could benefit these gambling stocks to buy:
- Boyd Gaming (NYSE:BYD)
- DraftKings (NASDAQ:DKNG)
- Penn National Gaming (NASDAQ:PENN)
- Landcadia Holdings II (NASDAQ:LCA)
- Esports Entertainment Group (NASDAQ:GMBL)
- Simplicity Esports and Gaming (OTCMKTS:WINR)
- Wynn Resorts (NASDAQ:WYNN)
Still, you should consider the gaming arena to be speculative. Unfortunately, coronavirus cases have been rising since early September, which could impact the sector’s nearer-term trajectory. However, the volatility may also provide discounted opportunities for these gambling stocks.
Gambling Stocks to Watch: Boyd Gaming (BYD)
As you might imagine, many gambling stocks are tethered to coronavirus infection trends. Basically, the more cases, the more likely it is that state and local governments will implement restrictive measures. Clearly, that wouldn’t help individual Americans’ personal economy, which would eventually translate to lower share prices for gaming companies.
But that narrative hasn’t played out for Boyd Gaming. Indeed, BYD stock has gone higher despite whatever has been going on with the Covid-19 pandemic. For instance, throughout most of July, coronavirus infections began rising worryingly. However, BYD shares also climbed during this period of fear and uncertainty.
Even now, BYD stock seems impervious to the possible second wave that’s hitting our nation. Likely, this has to do with its double exposure to physical and online gaming services. Should gambling-friendly areas like Las Vegas continue to reopen, this has a direct impact on Boyd, which offers many reasonably priced hotels across the nation.
If Covid-19 cases worsen, though, Boyd can rely on its diverse offering of online betting platforms and communities. No matter what, BYD has you covered, which makes it one of the more reliable gambling stocks to speculate on.
Around the middle of August, I stated that DraftKings was a high-conviction buy. Fundamentally, I must admit that being bullish on DKNG stock was a risk, considering that at the time, we just got past the Covid-19 infection peak. However, the specter of a second wave was still looming, which presented major concerns about sports.
Obviously, if cases worsened to the point where athletes’ and fans’ health were jeopardized, it’s conceivable that league commissioners could shut down their organizations. And that wouldn’t be too great for DKNG stock.
However, I observed that a bullish technical signal was playing out for DraftKings shares. So, on a nearer-term framework, DKNG seemed like a buy. Sure enough, shares went higher.
However, toward the end of September, I urged investors to take some profits. Shares were getting a little overheated while Covid-19 cases were ticking higher. Though DKNG jumped up toward early October, it eventually suffered a steep correction.
Although risky, the current price point is now very attractive. If you believe in gambling stocks, you may want to reconsider DraftKings.
Penn National Gaming (PENN)
When the coronavirus pandemic first turned our world upside down, it was hard to even think about gambling stocks. Back in March 2020, the personal saving rate was 12.9%, up big from 8.3% in February. But in April, the saving rate jumped to 33.6%, an all-time record since such statistics were kept.
The message was simple: everybody was saving money because they didn’t know what the heck was coming around the corner. Clearly, this wasn’t the time to mess around with gambling stocks.
However, an intrepid number of investors did do exactly that. From their perspective, the coronavirus would either fade away or we would grow accustomed to it. Either way, they reasoned, sports will make a comeback. When it does, Penn National Gaming’s 36% stake in Barstool Sports would pay off big time.
That it did. However, it’s reasonable to ask if PENN stock can continue moving higher given the rise of coronavirus cases. On Oct. 19, shares tumbled nearly 9%, which doesn’t really help investor confidence. Nevertheless, it’s possible this could be a discounted opportunity.
Although many find Barstool Sports founder Dave Portnoy controversial, he does have a mass following thanks to his politically incorrect takes. In addition, as long as Covid-19 doesn’t completely upend sports, PENN stock could benefit from the sports gambling angle.
Landcadia Holdings II (LCA)
Although I didn’t conduct a comprehensive survey, it appears that most InvestorPlace writers are hesitant to engage Landcadia Holdings II. For one thing, Landcadia is a special purpose acquisition company (SPAC) that will combine with Golden Nugget’s online gaming business. However, people may getting SPAC fatigue due to the number of questionable investments using this distinct vehicle.
More importantly, it appears that buying LCA stock is merely a way for billionaires to bail themselves out of bad financial situations. As my colleague Will Ashworth warned, you don’t have to be the one to help Tilman Fertitta, the billionaire in this specific example.
I understand these concerns and that’s why I’m not gung-ho about this name. However, back in early September, I noted that LCA stock was a speculative buy. Essentially, shares were trading similarly to rival gambling stocks. Thus, the technicals demonstrated that Landcadia enjoyed the same fundamental tailwinds like DraftKings or Penn National.
Later that month, rising coronavirus cases indicated that LCA was temporarily a sell and so it was. Having shed considerable market value, though, Landcadia does look more appealing. Still, I’ve got to stress that this is probably one of the riskiest gambling stocks available.
Esports Entertainment Group (GMBL)
If you look at the price charts for gambling stocks, many of them have declined in recent weeks. Although I don’t want to point the finger at any one source as the culprit, it’s reasonably clear that rising Covid-19 cases are spooking investors. Not only are there health implications, Wall Street is also concerned about uncertainty regarding a new stimulus deal.
Without a deal before the election, it’s unlikely that a lame-duck session (if Biden wins) will push through needed aid. Therefore, Washington will basically hold the American people hostage for at least two-and-a-half months until the new administration takes over.
Again, that’s terrible for gambling stocks, which are levered to discretionary income. But Esports Entertainment Group is on paper relatively insulated from the crises. That’s because GMBL stock, as you can tell from the underlying company name, is levered to esports. And esports is by nature a contactless “sport.”
Further, according to industry reports, “roughly 43% of esports enthusiasts have an annual household income of $75k with just under one third (31%) reporting an income of $90k or higher.” That kind of purchasing power mostly comes from white-collar jobs, which have been largely unaffected by Covid-19 thanks to remote work platforms.
In other words, esports fans are not the type of people that need aid. Combined with their contactless passion, GMBL stock has gone against the grain in recent weeks. And it’s possible that it could continue to rise higher.
Simplicity Esports and Gaming (WINR)
Despite Simplicity Esports and Gaming’s ticker name, WINR stock is no winner, at least not consistently. Yes, shares have moved higher in September and quite dramatically thanks to the law of small numbers. But in recent days, WINR has been volatile, taking investors on a stomach-churning ride.
If you haven’t guessed, Simplicity Esports is not for the faint of heart. However, the esports angle does make shares interesting relative to other gambling stocks.
As I mentioned above for Esports Entertainment, the large number of high-income esports enthusiasts provides reliability for this sector. Sure, it’s not to the size of regular sports fan communities. Still, the base is wealthy and tech-savvy. Put another way, you can trust this base because they represent the new economy.
In addition, Simplicity’s business of consolidating gaming centers isn’t as terrible as it might seem during a pandemic. As Latoya Peterson pointed out, while esports has a growing racial gap, the sector is nevertheless diverse. You’re just not going to find the comprehensive diversity that you find in esports in any other sports league.
In a time of severe racial tensions, gaming could help bring people together because everybody loves video games. Although wildly risky, WINR stock could benefit from a feel-good narrative.
Wynn Resorts (WYNN)
I haven’t been to Las Vegas since the pandemic broke out, but I’ve traveled around in my home state of California. Admittedly, I was nervous about being in a hotel. Honestly, you just don’t know who’s been in there, what they might have and most importantly, whether you can trust the cleaning staff.
After all, they have to work during a pandemic for relatively menial wages. Who wouldn’t be tempted to slack off on the job?
But now, with rising Covid-19 cases, the narrative for brick-and-mortar gambling stocks like Wynn Resorts is questionable. While Americans are getting accustomed to the new normal, that’s not a guarantee that a second wave won’t hit us hard. Plus, if a second wave happens, even Covid-deniers will be forced to do something to control the outbreaks.
Not surprisingly, then, I’m not entirely ecstatic about WYNN stock. However, if you’re dead set on gambling stocks, you may want to give this a look. Over the long term, Las Vegas should see an influx of people as they escape high-taxation zones like California. This demographic shift would suggest that Vegas will eventually become an economic powerhouse beyond the gambling sector.
Of course, if the Vegas economy improves holistically, that’s a big benefit for the gaming industry. Therefore, if you can stomach volatility, you may wish to consider WYNN stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.