The best gambling stocks to buy have two, strong positive catalysts at this point. Specifically, brick-and-mortar casinos are benefiting from the pent-up demand for experiences, while the rapid growth of online, legalized sports gambling is boosting the leaders of that sector. Unsurprisingly, the best gambling stocks to buy are the names that are getting lifts from both positive catalysts.
Of course, buying such stocks enables investors to benefit from both trends. But also important to note is that the owners of brick-and-mortar casinos can use the latter business to boost their online sports betting operations.
That’s because these companies can market their online sports betting offerings to the longtime customers of their brick-and-mortar casinos. As a result, they don’t have to spend as much money on sales and marketing as their online-only competitors, giving them the best profit margins in the space.
As a result of their strong positions in both online sports gambling and brick-and-mortar casinos, these are the best gambling stocks to buy.
|MGM||MGM Resorts International||$30.46|
|PENN||Penn National Gaming, Inc.||$33.07|
|CZR||Caesars Entertainment, Inc.||$41.79|
Best Gambling Stocks: MGM Resorts (MGM)
On June 19, Goldman Sachs identified MGM Resorts (NYSE:MGM) as one of the market’s most stable stocks. According to the firm, MGM is one of those that should outperform in the current market, have “low share price volatility and stable earnings growth.”
Indeed, analysts, on average, expect MGM to deliver earnings per share of 70 cents this year and $1.57 in 2023, giving it a “stable earnings growth” outlook. And MGM has certainly not been a very volatile name , as it has ranged between $26.41 and $51.17 in the last 52 weeks.
With 13 casinos in Las Vegas, MGM is a prime beneficiary of the strong growth numbers of Nevada’s casinos. In May, for example, the state’s gambling revenue was 32% higher than in May 2019.
Meanwhile, the company’s joint venture, BetMGM, reported that its market share in February had come in at an impressive 25% in the highly fragmented, competitive online betting sector. The joint venture stated that it is still on track to boost its sales to $1.3 billion this year, up from $850 million in 2021, and it expects its long-term EBITDA margin to be 30% to 35%.
Penn National Gaming (PENN)
Penn National Gaming (NASDAQ:PENN) owns many regional brick-and-mortar casinos, and has a meaningful presence in the online sports betting sector. As of February, the company reported that its national share of the retail sports betting market outside of Nevada was 12%.
CEO Jay Snowden, stated that “Penn Interactive is the leading operator of retail sportsbooks in West Virginia, Indiana, Iowa, Michigan, Colorado, and Louisiana, and we believe we are similarly well positioned for success in Ohio.” As online-sports betting is legalized in more states, Penn Interactive’s top and bottom lines should surge, lifting Penn Nation.
In Q1, Penn’s top line jumped 23% from a year ago to $1.56 billion, and its EBITDA, excluding certain items, surged 29% to $435 million.
When the pandemic was front and center in investors’ minds PENN stock had a ridiculously high valuation. But now the shares have a very attractive forward price-earnings ratio of just 13.8.
Best Gambling Stocks: Caesar’s Entertainment (CZR)
Like my first two picks, Caesar’s Entertainment (NASDAQ:CZR) combines an extensive brick-and-mortar casino network with a vibrant online-betting business.
In a note to investors on June 28, B. Riley analyst David Bain wrote that Caesars is “the fastest market share gainer of significance in digital.” Bain also thinks that the company is benefiting from “significantly stronger margins versus industry averages,” and he thinks that many casino stocks could double in the next year if the U.S. avoids a recession.
Since I don’t anticipate that a recession will hit the U.S. in the next year, I think that CZR stock has an excellent chance of jumping 100% in the upcoming 12 months.
Also upbeat on CZR stock last month was Macquarie. The firm identified CZR stock, along with MGM and PENN stock as its best picks amid slowing economic growth. As reasons for its bullishness on those names, Macquarie cited, in the words of Seeking Alpha, “geographic exposure, ability to hold operating margins, and exposure to the bourgeoning online gaming and sports betting industry.”
On the date of publication, Larry Ramer owned shares of MGM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.