Investors and traders are always looking for catalysts that can send the prices of stocks in a certain industry soaring higher. That’s why there are a lot of eyes on companies in the sports betting industry at this time. About two years ago, the Supreme Court decided to remove the federal ban on sports betting and allow states to individually legalize it. At this time, more than two dozen states have legalized sports betting, but many believe that the real potential for the industry’s growth trajectory is in online sports betting, which still faces opposition in many states. However, that could be changing quickly.
Quite a few states are currently dealing with budgetary issues that might make them consider legalizing online sports betting to generate additional tax revenue. New York Governor Andrew Cuomo is the latest high-profile figure recently to support legislation for online sports wagering, and legal sports betting in New York would be a massive win for the industry. While 14 states have already legalized online sports betting, just imagine the potential for the industry as more states follow suit. That’s why we are taking a look at 3 sports betting stocks with great odds to rally.
DraftKings NASDAQ: DKNG
The first stock on our list is DraftKings, an online sports betting company that went public via a SPAC back in 2020. The company is widely known for its daily fantasy sports offerings but also allows its users to bet on sports with its Sportsbook product offering. DraftKings already has over 4 million users on its daily fantasy platform and could be one of the biggest brands in the industry as more states head towards legalization.
Last year showed that DraftKings is heading in the right direction in terms of top-line growth, as the company reported a year-over-year revenue increase of 98% in Q3 to $133 million. There are also some promising signs that the company’s monthly unique payers are growing at a rapid rate, as DraftKings reported a 64% Q3 increase in monthly unique payers compared to 2019. With live sports back in full force this year and the company providing 2021 revenue guidance of $750-$850 million, which would be a 45% year-over-year increase, this stock could end up being a home run for investors.
MGM Resorts International NYSE: MGM
MGM Resorts is another name to watch in the sports betting industry, particularly since it already has property in Yonkers, NY. That should allow the company to take full advantage of the new sports betting market if New York becomes the next state to legalize. This is a stock that has been beaten down during the pandemic, as the company owns and operates casino resorts both domestically and in China. However, as the vaccine becomes widely distributed we should see traffic pick up in casinos again which will help the company’s earnings recover.
On the sports betting side of the business, the company has been spending big on developing its mobile platform, BetMGM. The company is partnering up with the NBA, MLB, NHL, and other professional sports teams to take its online betting products to the next level. MGM also has 21 properties in the United States that should benefit as the sports betting market expands, along with property in Macau that should deliver long-term growth for shareholders. When the company starts to see a sharper recovery in its casino revenue, it can use those cash flows to further invest in its online sports betting products, making it one of the best options in online sports betting even though it comes with some added risk.
Penn National Gaming NASDAQ: PENN
The final stock on our list has rallied over 2500% from its March low of $3.75 per share, which means that investors need to be extra careful about chasing at this time. With that said, it’s hard to deny that Penn National Gaming has serious momentum working in its favor and could continue rallying in 2021. The company owns and manages gaming facilities, racing facilities, and video gaming terminals with a focus on slot machine entertainment. Penn also recently launched its online sports betting application Barstool Sportsbook in Pennsylvania to great success, with over $11 million wagered in the first week alone.
The company plans to launch the Barstool Sportsbook application in additional states such as Illinois, Indiana, New Jersey, Virginia, and West Virginia in the future which could be a strong growth catalyst for the company going forward. The Barstool Sports brand is strong and has a loyal following, which might help this company gain a leg-up against competitors in the online sports betting arena. While the company’s valuation is stretched, if the stock can hold its $100 breakout there’s a good chance it will continue to rally.
Before you consider DraftKings, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and DraftKings wasn't on the list.
While DraftKings currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
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