Sports are often aptly referred to as the “candy store of life.” That said, the lack of our sugar fix was apparent in the initial months of the novel coronavirus pandemic when live sports went dark. And for investors in sports betting stocks, they were missing another kind of fix.
However, the lack of live sports was creating a more pressing issue for many states. Already faced with budget shortfalls due to a lack of economic activity, states that had legalized sports gambling were not getting that revenue. There was nothing to bet on (except stocks, but that’s another article).
The particular irony of this dilemma was even more evident since the majority of sports bets can be placed from a desktop or mobile device. And online betting is the preferred way for customers to place their best. As of November 2020, nearly 94% of the $931.6 million wagered in New Jersey sportsbooks was done online.
Currently, more than a dozen states have legalized sports betting, but that number is going to rise. In fact, a handful of states have recently passed laws but do not have the infrastructure in place to support betting.
Overall, there’s a simple reason for the growing interest: States need the tax revenue.
As a case in point, New York Governor Andrew Cuomo is proposing legislation to authorize mobile betting in the state of New York. If the proposal passes, analysts believe it could make New York home to the largest sports book in the U.S., worth nearly $1 billion in taxable revenue.
With all of that in mind, here are eight sports betting stocks that give you different ways to play the sector:
- DraftKings (NASDAQ:DKNG)
- Flutter Entertainment (OTCMKTS:PDYPY)
- MGM Resorts (NYSE:MGM)
- Penn National Gaming (NASDAQ:PENN)
- Boyd Gaming (NYSE:BYD)
- Caesar’s Entertainment (NASDAQ:CZR)
- ESports Entertainment (NASDAQ:GMBL)
- Scientific Games (NASDAQ:SGMS)
Now, let’s dive in and take a closer look at each one.
Hot Sports Betting Stocks: DraftKings (DKNG)
DraftKings is one of the most well-known names among sports betting stocks. The company is “making it rain” for its customer base, which according to the company includes over five million users on its daily fantasy sports platform.
If the company’s estimates are accurate, DraftKings will claim over 10% of the total addressable market for online sports betting and iGaming in the next few years.
And with those five million users already using the company’s fantasy sports platform, they are expecting little resistance to moving them to its sportsbook platform when, and if, it becomes available in the user’s home state.
DraftKings reported a 98% year-over-year revenue increase in its most recent earnings report. That’s astonishing considering that the company would still have posted a 42% increase from its core business without any acquisitions. And the company is projecting a 45% YOY revenue increase for 2021.
If that weren’t enough, DKNG stock will have a catalyst from exclusive deals to be the sportsbook partner for multiple professional sports teams. And if you’ve been watching ESPN, than you’ve seen the first efforts of the company’s multi-year agreement with DraftKings to be a co-exclusive sportsbook link-out provider.
Flutter Entertainment (PDYPY)
Collectively, FanDuel makes up the other half of the fantasy sports duopoly with DraftKings. And in 2018, when the Federal Trade Commission nixed plans for the two companies to merge, FanDuel found another dancing partner. And that partnership with Paddy Power which has since been renamed Flutter Entertainment.
As recently as December, Flutter announced it would increase its ownership in FanDuel to 95% (it was 57.8%). As part of the purchase, the company issued around 11.7 million new shares of Flutter Entertainment stock. Flutter also has a partnership with Fox Corporation (NASDAQ:FOX), which helped Flutter with funding for the deal.
Moreover, FanDuel has 43% market share in a handful of states, and is projecting revenues to be approximately 50% higher than that of DraftKings. Also, by the end of the year, FanDuel expects to have an online gaming footprint in 14 states with iGaming in four states.
PDYPY stock is up nearly 63% since the beginning of 2020. And if you bought the stock when it was trading at around $30 at the onset of the pandemic, you would be sitting on a gain of over 225%.
Hot Sports Betting Stocks: MGM Resorts (MGM)
I first wrote about MGM in April. At the time, the fate of live sports was less certain and MGM had just launched its BetMGM app. Talk about getting all dressed up and having nowhere to go. And the early days of the pandemic were unkind to MGM stock.
But the company has rebounded and the stock is now within shouting distance of its pre-pandemic highs. The company signed an agreement to be the official sportsbook for the Philadelphia 76ers and the company’s Borgata Resorts Hotel Casino & Spa in Atlantic City is now the “Official Away Game Host” of the team.
I expect that the company will have several more partnerships like this in the near future. And according to Morningstar analyst Dan Wasiolek, MGM is likely to draw about 4% of its total revenue in 2024 from sports betting. And with that market expected to be approximately $6.2 billion, investors have a chance to buy now and enjoy the ride.
Penn National Gaming (PENN)
Although Penn National Gaming has a brick and mortar footprint that spans more than a third of the U.S., the story of PENN among sports betting stocks comes down to two words: Barstool Sports.
I’m a sucker for solid branding, and that’s what Barstool provides to Penn National Gaming. Barstool is the sports media empire that’s run by David Portnoy. Ryan Sigdahl of Craig-Hallum gave the stock a “buy” rating (and $75 price target) while commenting “… it will elevate their brick and mortar casinos with a Barstool retail sportsbook and a Barstool bar next to it.”
The allure for investors is fairly clear. Barstool has 66 million monthly users. If Penn gets a considerable portion of that audience to become sports bettors, it will be an immediate lift for the stock. And if the early returns are any indication, that won’t be a problem.
The Barstool app had 21,000 daily downloads in the first weekend it was available for sports betting. However, while that number was larger than either DraftKing’s or FanDuel’s daily records, Barstool did not cannibalize from those sports books. Thus, this could suggest a larger addressable market than previously thought.
Hot Sports Betting Stocks: Boyd Gaming (BYD)
Like many stocks on this list, Boyd Gaming is not a pure play among sports betting stocks. However, the company does own 5% of FanDuel. And it recently launched B Connected Sports, a mobile app for sports betting that allows, among other features, the ability to bet on all professional and collegiate sports. At this time, the app is only available for users in Nevada.
Additionally, the company has a large footprint in on-premise gaming services. But that’s not what helped BYD stock deliver a gain of nearly 50% in 2020. That was courtesy of the company’s on-line gaming platforms and communities.
This should raise investor confidence as we enter a new year. Even with the slower-than –desired release of the Covid-19 vaccines, the vaccine is being distributed. And that is providing genuine hope that consumer travel may return to something approaching normal by the end of the year. That would be a shot in the arm for Boyd’s casinos and hotels.
Caesar’s Entertainment (CZR)
Caesar’s makes this list of sports betting stocks because of the casino chain’s pending acquisition of William Hill (OTCMKTS:WIMHY). The deal is expected to close in the first quarter. When it does, the company will become an immediate player in the iGaming and sports betting sectors with a large brick and mortar footprint to deliver impressive scale. Caesars says it will look to sell William Hill’s international business after the acquisition is complete which could defray some of the $3.7 billion purchase price.
However, the reason that CZR stock soared over 1,000% since March 2020 is the strength of its regional casino model. Once casinos were able to reopen, the ability of customers to reach its property by car helped keep revenue coming through the door. And the company is hoping that the delivery of a vaccine will send more customers to its properties in Las Vegas where the company is the second largest operator.
Hot Sports Betting Stocks: ESports Entertainment Group (GMBL)
The novel coronavirus pandemic has been a catalyst for emerging trends. For example, the growth of e-commerce has expanded as shopping from home became a necessity instead of a convenience. A similar narrative has emerged with work-from-home stocks. Many Americans may never go back to the way things were. And some businesses are realizing they may not need to have employees back in the office.
In terms of sports betting stocks, the lack of live, in-person sports stoked the demand for betting on esports — and ESports Entertainment has been a beneficiary of that trend. In fact, GMBL stock is up over 30.6% in the last 12 months.
The company operates as an online gaming company in Canada and also operates Vie, an online esports betting website. In May 2020, the company signed a binding Letter of Intent to acquire LHE Enterprises. This will give ESports access to Argyll Entertainment, an online sportsbook and casino operator. Argyll is an established gaming company in the United Kingdom and Ireland.
Scientific Games (SGMS)
All of this technology has to have a provider, and that’s where Scientific Games comes in. An investment in SGMS stock is a bet about machines, not properties. However, all of the companies listed above will need physical products and services to deliver to consumers.
Scientific Games is a global provider of the technology-based products and services and related content for among other things the social and digital gaming industries. The company’s products extend beyond the walls of a casino to your local convenience store where you may purchase a lottery ticket. And that means its addressable market is larger than the sports better.
The company’s market cap has charged higher from $1.5 billion just six months ago to its current market cap of $4.3 billion. The stock does not always follow the underlying gaming sector, but the stock chart over the past year shows a similar pattern. SGMS stock is up nearly 70% in the last 12 months.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.