If you’re looking for stocks to buy in a growing industry, it only makes sense to look at sports betting.
Americans love to bet on sports. Half of all Americans placed a bet on this year’s Super Bowl and in October of last year (2020), Americans legally bet an estimated $3 billion on various sports contests, from regular-season NFL football games to the baseball World Series.
Sports betting is growing in popularity as more states and countries around the world legalize sports betting as a means of growing their tax base in the wake of the Covid-19 pandemic.
This year, U.S. states ranging from Connecticut to Louisiana have legalized sports betting for the first time, giving people a chance to bet on contests for the first time. Here are three stocks to buy to make bank on the boom in sports betting that’s currently taking place.
Sports Betting Stocks to Buy: Draftkings (DKNG)
DraftKings is fast becoming one of the best-known online sports betting brands. The company continues to aggressively expand in the U.S. and abroad.
Over the past six months, Draftkings has secured its position as the official sports betting partner of the National Football League (NFL), announced a $1.56 billion acquisition of Golden Nugget online gaming and offered to pay $20 billion in a bid to purchase Entain, a large sports betting company based in England.
Draftkings is also expanding into Canada, where sports betting has just been legalized for the very first time.
Sadly, all of the moves being made by Draftkings haven’t helped the company’s share price. DKNG stock has fallen almost 20% in the past month to almost $49 and is now up just 9% on the year.
However, since going public through a special purpose acquisition company (SPAC) deal in April 2020, Draftkings shares have risen 291%. Despite its recent lackluster performance, analysts remain bullish on the company’s stock with a median price target of $74.00, suggesting a 55% upside from current levels.
Penn National Gaming (PENN)
Penn National Gaming is a more traditional gaming company. While it has an online presence, the company’s bread-and-butter comes from the brick-and-mortar casinos it operates in 20 states across the U.S.
Those casinos offer gamblers access to slot machines, card games and live sports betting including horseracing. Recognizing the rapid growth of sports betting, Penn National Gaming acquired in 2020 a 36% stake in lifestyle, media and digital company Barstool Sports for $450 million.
Penn National Gaming is taking advantage of Barstool Sports 66 million active users to launch the Barstool Sportsbook app in states such as Pennsylvania, Michigan and Illinois.
More recently, the company announced a $2 billion acquisition of Score Media and Gaming this past August. Score Media gives Penn National a strong foothold in the Canadian mobile sports betting market that is currently exploding as people in the Great White North can bet on professional football and basketball games for the first time.
PENN stock is another security that has had a rough ride this year, having fallen 28% over the last six months to now trade at $74.
However, like DKNG stock, analysts feel strongly that Penn National Gaming shares are grossly undervalued. The median price target on Penn National shares is $105, implying a future gain of 44%.
Sports Betting Stocks to Buy: Flutter Entertainment (FLTR)
Flutter Entertainment is not a household name in the U.S., but the sports betting brands it owns are.
In fact, with a market capitalization of $37 billion, Flutter Entertainment is today the most valuable sports betting company in the world.
Its popular global brands include PokerStars and the daily fantasy betting colossus FanDuel. FanDuel is the largest competitor of DraftKings with a 45% share of the U.S. online sportsbook market. FanDuel is a top destination for gamblers who play fantasy football during the NFL season.
Flutter’s business has been firing on all cylinders since it acquired PokerStars in 2020. Flutter Entertainment’s revenue grew 28% in the first half of this year from the same period a year earlier.
However, perhaps surprisingly, Flutter is not yet profitable. It forecast that it should become profitable sometime in 2023. FLTR stock has also slumped this year, down 7% year-to-date at $14,405 British pounds per share. However, the stock appears to have bottomed over the last month. Could it rise as the NFL football season progresses?
Disclosure: On the date of publication, Joel Baglole 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.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
