One of the many consequences of the novel coronavirus was the shutdown of live sports. For sports-minded individuals, one of the events that were missed the most was the NCAA Basketball Tournament affectionately known as March Madness.
But in addition to missing the entertainment that sports provide, cities and states realized, if they didn’t already, that sports are an economic necessity.
Live sports may also be a key to their post-pandemic future. But this goes beyond hotels and restaurants.
Sports betting has become big business. Currently, 25 states and the District of Columbia have legalized sports betting either by statute or by ballot initiative. That list is likely to grow. Many states face budget deficits and want to legalize sports betting for the revenue that it could receive.
And this is about more than allowing gamblers to place bets via a sportsbook in a casino. The real driver for this is mobile sports betting. According to the American Gaming Association, over 47 million people are expected to place bets during the NCAA basketball tournament, with approximately one-third of those bets (17.8 million) being placed online.
To help you take advantage of this still-emerging trend, we’ve put together this special presentation. Here we’ll highlight seven sports betting stocks that should generate significant revenue during March Madness and beyond.
Quick Links
- DraftKings
- Flutter Entertainment
- MGM Resorts
- Boyd Gaming
- Penn National Gaming
- Caesar’s Entertainment
- Churchill Downs
#1 - DraftKings (NASDAQ:DKNG)
DraftKings (NASDAQ:DKNG) is a logical choice to head this list. The company cites over 4 million users on its daily fantasy sports platform. And a big reason for that is because DraftKings is the official daily fantasy partner of the National Football League (NFL).
Those four million users will go a long way to helping DraftKings meet its forecast to claim over 10% of the total addressable market for online sports betting and iGaming.
Analysts are increasing their price targets for DraftKings. And the stock also has the interest of Cathie Wood, the CEO and Chief Investment Officer of ARK Investment Management who purchased over $433 million of DKNG stock.
DKNG stock is up over 50% in 2021. This is despite the stock having a sharp selloff on March 16 when the company announced a $1 billion issue of convertible notes. Investors were first concerned about the dilutive effect that such things can produce. But it seems as investors have digested the information, they realize that the company may be raising cash in advance of an acquisition of some sort.
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 - Flutter Entertainment (NYSE:FLUT)
Flutter Entertainment (OTCMKTS:PDYPY) is the parent company of FanDuel, which makes up the other part of what is, for now, a duopoly in the sports betting sector. As some investors may remember, FanDuel attempted to merge with DraftKings in 2018. However, the Federal Trade Commission (FTC) rejected that plan. That led FanDuel to the UK company, Paddy Power, which is now Flutter Entertainment.
Currently, FanDuel boasts an approximately 40% market share. And by year’s end, FanDuel expects to have an online gaming footprint in 14 states with a strictly iGaming presence in four states. If those projections pan out, it would put the company on pace to generate 50% more revenue than DraftKings.
PDYPY stock is up around 10% early in 2021. This has been disappointing to investors in Flutter Entertainment. And that is leading to some speculation that Flutter may be looking to spin off FanDuel as a separate entity. This would be similar to when DraftKings went public as a separate entity in 2019. However, there appear to be many hurdles to clear before such a move could happen.
About Flutter Entertainment
Flutter Entertainment plc operates as a sports betting and gaming company in the United Kingdom, Ireland, Australia, the United States, Italy, and internationally. The company operates through four segments: UK & Ireland, Australia, International, and US. It offers sports betting, iGaming, daily fantasy sports, online racing wagering, and TV broadcasting products; sportsbooks and exchange sports betting products, and gaming products; and online sports betting.
Read More - Current Price
- $264.78
- Consensus Rating
- Buy
- Ratings Breakdown
- 17 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $301.53 (13.9% Upside)
#3 - MGM Resorts (NYSE:MGM)
For MGM (NYSE:MGM), the Covid-19 pandemic was double trouble. First the Las Vegas-based company was forced to shut down its entire network of hotel and casino properties. But what added to the company’s troubles was that MGM had just launched its own sports betting app, BetMGM.
However, the ability to generate revenue both as a traditional sportsbook and via its mobile gaming app is now working in the company’s favor. In the last 12 months, MGM stock is up over 320% and the company looks to just be getting started.
The company projects the combination of sports betting and online gambling to be worth in excess of $20 billion by 2025 with sports betting making up about a third of that number. Currently, MGM has a 17% market share and management is forecasting keeping market share in a range between 15% and 20%. And that number only includes about 4% of its revenue being due to sports betting in 2021.
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)
#4 - Boyd Gaming (NYSE:BYD)
Like MGM, Boyd Gaming (NYSE:BYD) is not a pure-play sports betting stock. And also like MGM, Boyd is a Las Vegas-based company that saw its business turned upside down due to the pandemic. But the company has its own sports betting app, B Connected Sports in addition to owning 5% of FanDuel. However, at this time, the app is only available to Nevada residents.
As 2020 wore on, Boyd was able to recognize some recovery in its land-based and riverboat casinos. But the real growth came from its on-line gaming platform. In fact, much of the 50% gain in BYD stock in 2020 was attributable to on-line gaming.
Boyd may never be able to garner the kind of market share that FanDuel or DraftKings has. However, as Las Vegas comes back into play with pent-up demand, the combination of a thriving on-premise casino business along with on-line gaming should keep BYD stock going strong in 2021.
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)
#5 - Penn National Gaming (NASDAQ:PENN)
How you feel about Penn National Gaming (NASDAQ:PENN) may very well come down to how you feel about Dave Portnoy. Portnoy runs Barstool Sports which is the sports media business and sportsbook. Penn’s association with Barstool enhances its already impressive network of casinos that covers 19 states. And according to Goldman Sachs, the partnership with Barstool could add $4 per share to the company’s value.
Barstool has 66 million users. Not all of those users bet on sports. However, Penn doesn’t need all of them to gamble. But it’s likely that it will get a sizable percentage which should be a nice lift for PENN stock. And the early returns are showing that Barstool is able to generate an audience without cannibalizing users from either FanDuel or DraftKings. It’s too early to tell if this signals that there is a much larger addressable audience. It could be signaling that users are comfortable using multiple mobile sports betting apps. Either outcome would be favorable to Penn.
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)
#6 - Caesar’s Entertainment (NASDAQ:CZR)
Last but certainly not least among sports betting/casino stocks is Caesar’s Entertainment (NASDAQ:CZR). On the plus side is the company’s enormous footprint. It is the nation’s largest casino operator. One of the strengths of Caesar’s business model is that many of its properties are reachable by car. This meant that once casinos opened, the company didn’t have to rely on gamblers getting on an airplane. But when they do, Caesar’s is the second largest operator in Las Vegas.
And it has been incredibly adept at finding ways to manage costs and drive revenue, a skill set that helped the company weather the Covid-19 pandemic.
And with the company’s recent acquisition of William Hill (OTCMKTS:WIMHY), it has a large customer base to monetize. It remains to be seen if Caesar’s will follow through on its intention to sell the international arm of the William Hill business. That would help lower the $3.69 billion purchase price.
The addition of sports betting will only enhance the prospect for CZR stock which is already up 32% in 2021.
About Caesars Entertainment
Caesars Entertainment, Inc operates as a gaming and hospitality company. The company owns, leases, or manages domestic properties in 18 states with slot machines, video lottery terminals and e-tables, and hotel rooms, as well as table games, including poker. It also operates and conducts retail and online sports wagering across 31 jurisdictions in North America and operates iGaming in five jurisdictions in North America; sports betting from our retail and online sportsbooks; and other games, such as keno.
Read More - Current Price
- $32.82
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 1 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $53.71 (63.7% Upside)
#7 - Churchill Downs (NASDAQ:CHDN)
The last stock on our list is Churchill Downs (NASDAQ:CHDN). The company is best known for the iconic race track that hosts the Kentucky Derby. The good news for fans of horse racing is that the Derby should be back at its normal date. And at this time, it may be able to have a small amount of fans.
But CHDN stock is worth your consideration for other reasons. Churchill Downs operates resorts and casinos throughout the United States. The company also occupies a space in the online sports betting world. Critics will cite that the company makes a lot of its sports betting revenue from horse racing. But we’re still in the early days of this market. And even if Churchill Downs becomes a niche player, there may still be a great opportunity.
CHDN stock is up 28% in 2021, but investors will want to exercise some level of caution. The company is in the middle of executing a capital expenditure plan that is likely to cut into its margins for the year.
About Churchill Downs
Churchill Downs Incorporated operates as a racing, online wagering, and gaming entertainment company in the United States. It operates through three segments: Live and Historical Racing, TwinSpires, and Gaming. The company operates pari-mutuel gaming entertainment venues; TwinSpires, an online wagering platform for horse racing, sports, and iGaming; retail sports books; casino gaming; and Terre Haute Casino Resort.
Read More - Current Price
- $132.23
- Consensus Rating
- Buy
- Ratings Breakdown
- 8 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $160.88 (21.7% Upside)
It’s almost impossible to underestimate the impact of the opportunity that sports betting represents. Last year, 94% of the over $900 million bet through New Jersey sportsbooks was done online. New York, which legalized sports betting via casinos in 2018, has a ballot initiative to legalize mobile gaming. If passed, the state would likely be home to the largest sportsbook in the country with over $1 billion in taxable revenue. Those are just two examples.
Our country has embraced the gambling culture in a way that many would not have thought likely, or even possible, just a couple of generations ago. This is a multi-billion industry that is still early in its lifecycle.
The stocks in this presentation are among the first movers and will likely to be among the key names to watch as the industry consolidates and matures. The stock market can be as volatile and unpredictable as March Madness, but an investment in any of these stocks is likely to be worth the thrill.
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