Top Online Gambling Stocks To Watch For Potential Huge Growth
Online gambling stocks have been one of the most discussed topics at one time among investors. The industry could also be represented by The Roundhill Sports Betting & Gaming ETF (BETZ Stock Report). The ETF covers sports betting and online gambling stocks globally. Since coming to the market in June, the fund has returned about 21% to date. While the hype with online sports gambling may make investors get carried away with the “potential” and forget about the “risks”, investors should do more thorough research before blindly investing in this space. After all, it is a relatively new niche in the gaming industry. And when something is new, the valuations may get too far ahead of what is justifiable.
The Total Addressable Market Is Massive For Online Gambling Companies
Truth be told, the online betting market is huge, and is currently growing at a staggering rate. For instance, in 2018, the first full year of legal sports betting in the U.S. saw $13 billion wagered, according to the American Gaming Association (AGA). The number we saw in 2019 was double of 2018’s. If you haven’t been paying attention to this niche area of gambling, maybe it’s time to pay closer attention to its development. Also, the AGA also found out 24% of Americans would bet on NFL games “if it was legal and convenient to do so in their state”.
With legalization across the country, you only have to guess how big the market could be. Independent research firm Gambling Compliance says the U.S. betting market will range between $5.9 billion and $8.2 billion by 2024. Morgan Stanley believes the U.S. sports betting market could hit $10 billion annually by 2025. Globally, it sees sports betting topping $100 billion. BofA Securities sees the U.S. market hitting $24 billion by 2030. If you would like to bet on this burgeoning industry, do you have some exposure to these online gambling stocks?
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Online Gambling Stocks To Watch For Huge Potential Growth: DraftKings
Despite having had a huge run in DraftKings (DKNG Stock Report) stock price earlier this year, the month of October was brutal to DKNG stock investors. That’s because the stock plunged more than 41% over that month. When you see a stock falling at such a pace, it either scares away the existing investors or attracts more attention among new investors. If you are looking to buy low and sell high, would the recent dips in DKNG stock provide a nice set-up for new investors to buy at a discount? Sure, the U.S. presidential election is keeping investors on the sidelines right now. But the truth is, the election today has nothing to do with DKNG stock performance. That said, that doesn’t mean DKNG stock is a screaming buy now. The stock is down in October for good reasons.
The stock dilution, a surging number of coronavirus infections in the NFL, and insiders cashing out have all played their part in the stock’s slide in October. Within four months, the company and insiders put out 72 million shares on the market. That’s almost one-fifth of the company’s total outstanding shares. Certainly, investors don’t like that. What would you think when you see insiders selling out? Perhaps you wonder if they know something that you don’t.
As the company is not profitable, investors appear to value DKNG stock by looking at its sales. The current valuation is not cheap at 40 times sales. Admittedly, high growth may be able to justify this valuation. But the management’s guidance of between 22% and 37% revenue growth in the second half of 2020 has left investors scrambling for the exit. The question is, is the drop attractive enough for you to start considering the stock again?
Online Gambling Stocks To Watch For Huge Potential Growth: Penn National Gaming Inc.
Penn National Gaming Inc. (PENN Stock Report) beat analyst estimates with a strong set of quarterly numbers last week. This led analysts to reassess the stock. The company beat both earnings and revenue forecasts, with revenue of US$1.1b, some 2.5% above estimates, and statutory earnings per share (EPS) coming in at US$0.93, 76% ahead of expectations. You may be asking yourself, how is a casino business performing so well while companies like MGM Resorts (MGM Stock Report) and Wynn Resorts (WYNN Stock Report)?
Penn’s casino consists entirely of regional, drive-to properties. The company’s customers tend to be those who live not too far away. They don’t have to fly into town just to visit the casinos. Therefore, the cancellation of flights has not posed much of a challenge to the company’s casinos.
Recently, Penn and Barstool jointly introduced Barstool Sportsbook. This digital sports betting app is currently available in Pennsylvania. And guess what, it has gained tremendous early traction. Many investors are anticipating that PENN stock could benefit immensely from its stake in Barstool Sports. Barstool is big with younger millennial bettors. With the recently launched mobile betting app from Barstool, the investment could pay off in more ways as the NFL season progresses.
Online Gambling Stocks To Watch For Huge Potential Growth: GameAccount Network
Last, on the list, shares of GameAccount Network (GAN Stock Report) jumped more than 10% on Monday. This came following the unusual options activity that signals bullish sentiment without specific news. Unlike DraftKings and Penn National Gaming that operates a consumer-facing gaming platform, the company builds the technology and infrastructure on which online gambling operations run and sells that technology to U.S. casino operators through a Software-as-a-Service (SaaS) model.
The company allows physical casino operators to easily take their gambling business online, without having to develop everything from the ground up. The customers include large regional operators and individual tribal casino operators. The beauty of GAN is that you don’t have to bet on the success of anyone’s operator in particular. Rather, you are betting on online casinos as a whole.
GAN expects to report its third-quarter earnings on November 19. In the second-quarter report, the company saw that revenue increasing by 99% year over year. In addition, there was a 110% increase in real money internet gambling revenue to $5.7 million. If you are hopeful that online casinos will proliferate, GAN stock would be one of the best online casino stocks to watch. This comes as more operators intend to shift or expand their operations online. And GAN stock could be one of the best ways to gain exposure to this market through a pure-play technology provider.