We are entering week four of the NFL season and online betting just got a little busier with Fanatics and Caesars Entertainment (NASDAQ:CZR) offering live streaming of NFL games. They are doing so on their betting apps through Betvision, Genius Sports’ (NYSE:GENI) immersive sports wagering experience. It’s just another reminder to investors that gaming stocks should not be overlooked as September thankfully comes to a merciful end.
How have gaming stocks done in 2023?
I’m a big fan of Pacer ETFs, so I’ll use the Pacer Bluestar Digital Entertainment ETF (NASDAQ:ODDS) as my proxy. It’s up nearly 11% year-to-date, slightly behind the Standards and Practices (S&P) 500 with an 11.8% return. However, throughout the past year, ODDS is beating the index by 509 basis points, up 20.0%.
Right there in the opening paragraph, I’ve got one possible gaming stock selection. I’ll give that a pass and go for these three names from ODDS’ 51 holdings instead.
Happy investing in these gaming stocks, and please bet responsibly!
DraftKings (DKNG)
DraftKings (NASDAQ:DKNG) is ODDS’ largest holding with an 8.17% weighting.
What a bumpy ride it’s been for the sports-betting industry’s leading brand. Up 163% YTD, it’s still trading for a fraction of where it was in March 2021. As the industry has matured, it seems the brand has found its stride.
What changed? Sports betting became legal in more places.
In March 2021, 15 states had legalized online sports betting, representing 27% of the United States population. DraftKings was live in 12 of those states. Another six states had some form of iGaming; DKNG was live in four of those, representing another 11% of the population.
In its Q2 2023 Business Update, the company said that DraftKings Sportbook is live in 23 U.S. states and Ontario. This is a huge market. Another 6% of the U.S. population (Kentucky, North Carolina, Vermont, Puerto Rico) is set to get DraftKings live in the next few months. This is making it one of the strongest gaming stocks on the market.
This change is a big reason why 23 out of the 34 analysts covering DKNG give it a “Buy” rating with a target price of $37. This is 27% higher than where it’s currently trading.
DKNG someday will get back to $70. You can bet on it.
Entain (GMVHY)
Entain (OTCMKTS:GMVHY) is ODDS’ fifth-largest holding with a 3.85% weighting.
Entain offers a little of everything for the gambling crowd. It has more than 30 leading brands in more than 40 licensed territories worldwide. It is growing its active customer base by 14% compounded annually, and it generated 500 million British pounds ($610.1 million) in free cash in 2022. Entain did this on on revenue of 4.3 billion British pounds ($5.3 billion).
Business is brisk.
The company’s strategy involves four pillars of growth. The first is to dominate in the all-important U.S. market. Next, they plan to grow its presence in its existing markets. Third, they plan to expand into new regulated markets. Finally, entain will expand into interactive entertainment.
By focusing on the customer experience while diversifying its revenue streams, Entain plans to continue delivering throughout the long-term for shareholders.
In 2022, BetMGM, the company’s 50% joint venture with MGM Resorts International (NYSE:MGM), did exceptionally well. Since jumping into the U.S. market in 2018, BetMGM has grown revenue to nearly $1.5 billion. In 2022, that revenue grew a whopping 71% throughout 2021. It controls 19% of the combined sports betting and igaming market in the markets where it participates.
It now has sportsbooks in professional sports stadiums. BetMGM is live in 26 jurisdictions that account for 48% of the U.S. population.
While BetMGM has yet to breakeven on an annual basis, it is getting closer everyday. It’s not a pure-play sports betting operation. It’s much more.
Sportradar Group (SRAD)
Sportradar Group (NASDAQ:SRAD) isn’t a large piece of ODDS’ holdings. It accounts for just 0.96% of the ETF’s portfolio.
The Swiss-based company is part tech company, media business, sports betting sensation, all wrapped up under one roof. It partners with most of the major professional sports leagues, including the NBA, NHL and Bundesliga.
Mentioned in the intro, Sportradar competes with Genius Sports and several other sports data and software solution companies and sports content providers. So, while it’s not an easy business to capture market share, it’s doing plenty to keep its head above water.
In August, it announced its Q2 2023 results. They included a 22% increase in revenue to 216.4 million euros ($228.1 million), with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which was 46% higher year-over-year.
During the second quarter it expanded its relationship with Caesars. It is now the official supplier of betting data to the sportsbook from its various partner leagues including the NBA.
In the important U.S. market, Sportradar’s revenue grew 38% YOY to 38.0 million euros ($40.1 million), or about 18% overall. It’s a work in progress.
For 2023, it expects revenue of at least 902 million euros ($950.7 million) with adjusted EBITDA of 162 million euros ($170.8 million) at the midpoint of its guidance.
On the date of publication, Will Ashworth 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.
