If you didn’t believe that gambling stocks are a worthwhile investment, consider this. The Business Research Company projects the global gambling market to reach $565.4 billion through 2022. That assumes that the industry will continue growing at an annual rate of 5.9%.
The gambling industry is composed of many segments. There are casinos, lotteries, and the now legalized segment of sports betting. But gambling is also broken down into offline gambling, online gambling, and even virtual reality gambling. In fact, virtual reality gambling is projected to grow at an annual rate of 21.5% until 2022.
But virtual reality is only one of several emerging technologies that are changing the “traditional” face of the gambling industry. There are now hybrid games – the combination of online and land-based games and even augmented reality games.
And don’t forget about fantasy sports. Fantasy sports have created an entire industry, and it wasn’t created for one person to have bragging rights over their buddies. Fantasy sports is a multi-million industry.
But like many other segments of the economy, gambling stocks were hit hard by the Covid-19 pandemic. Not only were casinos closed, but live sports were also put on hold. This dried up many of the traditional avenues of gambling, and gambling stocks sank lower as a result.
However, the global economy is starting to re-open. And while it was thought that casinos would be one of the last to come back, some casinos are starting to re-open. And, it’s becoming more and more likely that there will be live sports (likely without fans initially) sooner rather than later. And that will open up the fantasy sports market.
These stocks tend to move quickly. So now is the time to take action. That’s why we’ve created this special presentation that highlights 6 gambling stocks that are ready for a rebound. The sell-off was real, but so will the comeback. And when it does, these stocks may cost much more than they do now.
Quick Links
- DraftKings
- Boyd Gaming
- Las Vegas Sands Corp.
- Penn National Gaming
- MGM Resorts International
- Esports Entertainment Group
#1 - DraftKings (NASDAQ:DKNG)
Fresh off its initial public offering (IPO), DraftKings (NASDAQ:DKNG) could not have had worse news than the Covid-19 pandemic. DraftKings is the United States leader in Fantasy Sports; the company has a 60% market share. This means that DraftKings relies heavily on the live sports industry. And with all major college and professional sports postponed due to the novel coronavirus, DraftKings revenue stream is limited.
It now appears that live sports will be returning in some fashion. And when they do, that will be a catalyst for DKNG stock. In the meantime, the company continues to offer to bet on things consumers can bet on, such as esports.
Analysts were encouraged by the company’s first-quarter results. The company’s revenue increased 30% to $89 million. Before the Covid-19 pandemic, DraftKings was showing a year-over-year gain of 60%. The company has approximately $450 million in cash. While major sports are on hold, the company has a cash burn of approximately $15 to $20 million a month.
DKNG stock is not without risk. Morgan Stanley (NSYE:MS) analyst Thomas Allen says that DraftKings will not be profitable until 2023. At that time, he projects the company will reach $1.4 billion in sales. And that means DraftKings is valued for its future potential, not for its current revenue. Currently, the stock is priced at about $9.9 billion. That’s about 14 times next year’s projected revenue of $700 million.
About DraftKings
DraftKings Inc operates as a digital sports entertainment and gaming company in the United States and internationally. It provides online sports betting and casino, daily fantasy sports, media, and other consumer products, as well as retails sportsbooks. The company also engages in the design and development of sports betting and casino gaming software for online and retail sportsbooks, and iGaming operators.
Read More - Current Price
- $40.35
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $51.00 (26.4% Upside)
#2 - Boyd Gaming (NYSE:BYD)
Boyd Gaming (NYSE:BYD) has started to open several of its properties. In the week of May 18, Boyd plans to open seven out of its 24 facilities. And while this will only cover two out of the seven states that the company operates in, the stock was climbing nearly 20% in the three trading days beginning May 18.
This means that BYD stock has shrugged off the 6% decline it suffered after reporting its first-quarter earnings. Boyd delivered $181 million in revenue from its Las Vegas properties and $446 million from its Midwest/South properties. This was below the $215 million and $517 million that analysts had projected.
Boyd has more than just its casino revenue to rely on. The company does have a 5% ownership stake in FanDuel. This will allow the company to take advantage of the fantasy sports market to see a rebirth when live sports return. That will also be a lift to the company’s sportsbooks that they operate in many of its casinos.
The company also has market access agreements that allow it to offer online and mobile gaming platforms in U.S. jurisdictions where the company has online licenses.
Despite the recent surge, BYD stock is down more than 30% for the year. Bank of America (NYSE:BAC) stock a $34 price target for BYD stock.
About Boyd Gaming
Boyd Gaming Corporation, together with its subsidiaries, operates as a multi-jurisdictional gaming company in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. The company operates through Las Vegas Locals, Downtown Las Vegas, Midwest & South, and Online segments.
Read More - Current Price
- $71.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $91.64 (28.7% Upside)
#3 - Las Vegas Sands Corp. (NYSE:LVS)
Another finding in the Business Research Company study is that the Asia-Pacific region makes up 32% of global gambling revenue. That’s one reason why investors should be excited about investing in Las Vegas Sands (NYSE:LVS).
The company has started to open several of its Asia properties. If management is correct, experience with past pandemics may be a catalyst for these properties doing well. During their conference call in April, executives expressed a sincere belief that because many Asian guests are already used to wearing face coverings and having their temperature taken – among other precautionary measures – they would be less resistant to returning.
Chief Executive Officer Robert Goldstein said, “I think they (Asian people) are going to welcome it and be anxious to get back to having fun. I believe … the recovery in Asia is going to happen rather quickly. I’m not as comfortable (about) Vegas.”
However, Las Vegas Sands has the balance sheet even in a zero revenue environment to weather the pandemic. As of its earnings report, the company had $2.6 billion of cash and equivalents. LVS also had $3.9 billion of short-term borrowing capacity. That would allow the company to stay solvent for 18 months, even without revenue.
About Las Vegas Sands
Las Vegas Sands Corp., together with its subsidiaries, develops, owns, and operates integrated resorts in Macao and Singapore. It owns and operates The Venetian Macao Resort Hotel, the Londoner Macao, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip, and the Sands Macao in Macao, the People's Republic of China; and Marina Bay Sands in Singapore.
Read More - Current Price
- $52.25
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $58.42 (11.8% Upside)
#4 - Penn National Gaming (NASDAQ:PENN)
If this were a “normal” economic downturn, investors would better understand the demand for casinos. But with casinos beginning to come online, Penn National Gaming (NASDAQ:PENN) should be able to continue its recent run.
Penn takes an asset-light approach that makes it more like a real estate investment trust (REIT) than a casino. The company has $8.5 billion of lease liabilities. The company has $900 million of lease payments (about 10%) due in 2020. This makes it critical for Penn to start seeing traffic, and revenue, return to casinos.
However, like many gambling stocks, Penn is not completely reliant on casino operations. The company also has a 36% stake in Barstool Sports. Barstool is a leading digital sports media company, and the deal that Penn struck with them makes Penn its exclusive gaming partner for up to 40 years. And that means Penn can use the Barstool brand to help market its own online and retail sports betting and iCasino products.
Having live sports coming back should be a catalyst for getting this revenue stream flowing.
And Penn has properties throughout the United States. This means that even if pockets of the virus return, the company should keep some properties open even if others have to close or remain closed.
About PENN Entertainment
PENN Entertainment, Inc, together with its subsidiaries, provides integrated entertainment, sports content, and casino gaming experiences. The company operates through five segments: Northeast, South, West, Midwest, and Interactive. It operates online sports betting in various jurisdictions; and iCasino under Hollywood Casino, L'Auberge, ESPN BET, and theScore Bet Sportsbook and Casino brands.
Read More - Current Price
- $18.62
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $23.53 (26.4% Upside)
#5 - MGM Resorts International (NYSE:MGM)
All casinos will face unique challenges as they attempt to safely re-open while encouraging demand. That’s why when considering gambling stocks, you should look for companies that have that something else. In the case of MGM Resorts International (NYSE:MGM) that something else is BetMGM.
If there’s one company that needs live sports more than DraftKings, it’s MGM. The company has created its own mobile betting app, BetMGM, and has big plans to be an active player in the live sports betting market.
Although it’s only legal to bet on sports in 16 states at this time, 31 states are now taking steps to legalize sports gambling. And according to Morgan Stanley analyst Thomas Allen, the sports betting market is $150 billion.
BetMGM will allow users to bet on pro and college football, as well as other sporting events such as Major League Baseball (MLB), the National Basketball Association (NBA), and the National Hockey League (NHL). And MGM is moving fast to seed BetMGM into every state where sports betting is legal. They have notable partnerships with Yahoo! Sports and Buffalo Wild Wings restaurants.
But all of this requires live sports. And that may still be awhile away.
About MGM Resorts International
MGM Resorts International, through its subsidiaries, owns and operates casino, hotel, and entertainment resorts in the United States and internationally. The company operates through three segments: Las Vegas Strip Resorts, Regional Operations, and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities.
Read More - Current Price
- $34.16
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $52.54 (53.8% Upside)
#6 - Esports Entertainment Group (NASDAQ:GMBL)
If you’re willing to overlook the low share price, Esports Entertainment Group (OTCMKTS:GMBL) may be a sneaky good play among gambling stocks. As of this writing, investors can grab shares of GMBL for less than $5 per share. However, the stock has been as high as $15.75 in the last 52 weeks. So this may very well be a buy on the dip opportunity. The stock is up about 15% in 2020.
Esports Entertainment is on the fringe of the online gambling niche. The company is focused on esports betting and, according to the company’s website, “intends to offer users from around the world the ability to participate in multi-player mobile, console and PC video game tournaments online for cash prizes.
GMBL was the first online gambling company to start trading on an American stock exchange. In mid-May, Esports Entertainment received its gaming license in Malta. This is an important step to launch its esports betting platform.
About Esports Entertainment Group
Esports Entertainment Group, Inc operates as an iGaming and entertainment company in the United States and internationally. It operates through two segments, EEG iGaming and EEG Games. The EEG iGaming segment operates iDefix, a casino platform. The EEG Games segment operates ggCircuit, a local area network center management software and services for managing mission critical functions, such as game licensing and payments; and creates esports content for distribution to the betting industry.
Read More - Current Price
- $0.23
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
I don’t have to tell you that gambling is a big business. But right now, like most of the world’s economy, gambling is at the beginning of a long road back. Just how long that road will have yet to be determined, but it’s logical to believe that demand for not only on-site but also online gambling to return in short order.
And if people are betting on Korean baseball and charity golf events, you can imagine there is just a bit of pent-up demand for live sports. When professional sports return, and it’s looking more likely that they will, there will be ample demand for fantasy sports and betting on games.
That makes now the time for you to get in on stocks that will put you in a position to take advantage of this increased demand. And with gambling stocks being about so much more than casinos, these stocks can help ensure you are where the action is.
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