Sports betting stocks have grown significantly since 2018. That was the year when the U.S. Supreme Court allowed states to legalize (as well as regulate and tax) sports betting.
March is a wonderful time of the year for sports betting enthusiasts. March Madness does offer a profitable opportunity. In 2019, the first year after the Supreme Court ruling, gamblers wagered $8.5 billion on the tournament. It was even higher last year.
Do you want to bet that the industry is about to break another record? That’s a wager I would feel more comfortable about than my bracket pool. States are lining up to legalize sports betting because it’s a revenue stream. In fact, New York State broke a record when it went online in January.
This also makes it a good time to consider investing in sports betting stocks. Many of these stocks are trading at significant discounts as part of the broad market sell-off. The reason for this is competition. There are a nearly endless number of online sportsbooks competing for consumer dollars.
There’s also reason to believe that several of these stocks may now be oversold. Here are seven sports betting stocks to consider before you turn in your final bracket.
- DraftKings (NASDAQ:DKNG)
- Caesars Entertainment (NASDAQ:CZR)
- MGM Resorts International (NYSE:MGM)
- Churchill Downs (NASDAQ:CHDN)
- Boyd Gaming (NYSE:BYD)
- Penn National Gaming (NASDAQ:PENN)
- FuboTV (NYSE:FUBO)
Sports Betting Stocks to Buy: DraftKings (DKNG)
DraftKings was one of the most anticipated stocks among a host of companies to go public via a special purpose acquisition company (SPAC) in 2020.
Unfortunately, SPAC companies have lost favor with the market as spectacularly as they gained it. That is a big reason that DKNG stock is down 47% from its 52-week high, but it’s not the only reason.
The company is generating revenue, but profit is another story. In fact, the company’s net loss increased from $1.23 billion in 2020 to $1.52 billion in 2021. It shows no sign of changing anytime soon.
Trading at around $15, DraftKings is showing signs of being oversold. Institutional ownership continues to increase, albeit at a slower rate. Analysts give DKNG stock a $46.42 consensus price target that would be an upside of more than 200% from the stock’s current level.
One way that sports betting stocks will try to differentiate themselves is through their partnerships. DraftKings is the official daily fantasy partner of the National Football League. It also enjoys a multi-year relationship with the National Basketball Association. This gives DraftKings expansive NBA rights and assets to use in their platform.
Caesars Entertainment (CZR)
Next on my list of sports betting stocks is Caesars Entertainment. CZR stock is down 40% from its 52-week high. As with DraftKings, though, the stock is showing signs of being oversold.
On March 8, the company’s CEO and another director made significant purchases of the company’s stock. Analysts give the stock a $124.85 price target which is a 74% upside.
The company is not a pure play on sports betting. Caesars is the nation’s largest casino operator which gives it a large footprint throughout the United States. It’s also the second-largest casino operator in Las Vegas.
Many of the properties are within driving distance for their customers. With uncertainty building about the direction of the economy, this may be a significant driver of revenue.
In terms of sports betting, the company just launched its sportsbook app in Illinois and recently expanded its use in the state of Washington.
MGM Resorts International (MGM)
MGM stock is “only” down 24% from its 52-week high. Of course, that also means that it doesn’t have the same eye-popping upside as with the first two stocks on this list.
Analysts give the stock a $55.30 price target which represents a 43% upside from its current level.
MGM is another of the stocks on this list that combines the benefits of a sportsbook with its bricks-and-mortar (and online) casino properties. And as Larry Ramer points out, the lifting of Covid-19 restrictions should be a benefit for the company’s casino portfolio.
BetMGM is the official sportsbook for the NBA’s Philadelphia 76ers and New York Knicks, the National Hockey League’s New York Rangers as well as Madison Square Garden Arena.
Revenue from the sportsbook jumped 500% year-over-year in 2021. MGM has managed to generate a (non-GAAP) profit in the last two quarters and the company is beating expectations for both earnings and revenue.
Churchill Downs (CHDN)
The iconic racetrack is home to the Kentucky Derby, but Churchill Downs is also the home of an online sportsbook, TwinSpires.
Initially, the site was only for online betting on horse races. It since has expanded to include an online sportsbook and iGaming platform. The company also is expanding its brick-and-mortar footprint with a new casino in Terre Haute, Indiana.
The proof is in the performance. Churchill Downs is reporting strong sequential and year-over-year revenue gains and is already profitable. Nevertheless, CHDN stock is down approximately 20% from its 52-week high. With the NCAA Basketball Tournament and the Run for the Roses without Covid restrictions coming in May, this may be a good time for investors to make a bet on the stock.
Unlike the other stocks on this list, Churchill Downs pays a small dividend that has been increasing for the last 11 years.
Boyd Gaming (BYD)
Boyd Gaming is not a pure-play on sports betting, but it is becoming an emerging player.
In this first place, the company has a stake in FanDuel which is one of DraftKing’s largest rivals.
The company recently launched B Connected Sports, its proprietary app, in Nevada. One of the features is the ability to bet on collegiate sports, a timely option as March Madness looms.
One reason to consider BYD stock is that it is clearly not following the downward trend of other sports betting stocks. In fact, the stock reached its 52-week high in February. It’s down about 13% since then but does not carry the “overvalued” label at this time.
One consideration when looking at sports betting stocks is which ones are drawing the attention of institutional investors. That’s the case with Boyd Gaming which is seeing a rise in institutional buying in the last two quarters.
Penn National Gaming (PENN)
Penn National Gaming is one of the leading online sportsbooks. In addition to operating its own interactive platforms and having casinos in 19 states, the company has a 36% stake in Barstool Sports.
This gives the company access to the millions of fans who actively engage with Barstool on social media.
PENN stock is down 71% from its all-time high. However, this may not paint an entirely accurate picture. Because of its affiliation with Barstool, Penn shares were caught up in the meme stock trade.
The stock is trading at a level that’s pretty consistent with where its shares were trading prior to the pandemic, and it does not appear to be overvalued at this time.
Penn plans to increase its investment in Barstool in 2023 and analysts love the stock. However, in the last two quarters Penn has not dazzled investors.
The company has missed on earnings (while still profitable) and has not been showing revenue growth. Penn also was unsuccessful in getting licensed for sports betting in New York. However, with licenses in 20 other states, that shouldn’t affect the stock too much.
The last stock on this list of sports betting stocks is FuboTV. The reason is simple. Perhaps no other event illustrates the synergy of FuboTV than March Madness.
You have an event that millions of Americans watch on television paired with a streaming company that targets the live sports niche. Add to that a company has its own sportsbook and FUBO should turn your head. FuboTV is designed to sync with the game being viewed and optimize its screen layout to display all relevant betting options.
I’ve described FUBO in the past as a sum-of-its-parts stock. As just a streaming service or just a sports betting stock, I’m not that interested, but together, the stock looks compelling. In fact, as Dana Blakenhorn pointed out that may make FuboTV a takeover target.
The company is not yet profitable, and the stock continues to get punished. Nevertheless, analysts give FUBO stock a consensus price target of $25.38 which is a more-than 300% gain from its current price.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.