Online betting gets my vote for the Next Big Thing. The ubiquitous TV commercials may indicate it’s already here, but the industry is still in its infancy. The American Gaming Association reports that sports betting revenues, both online and in what are known as the sports betting sections of physical casinos, increased 436% in the first seven months of 2021 compared to the same period a year earlier and 539%. out of 2019. But the total was only $ 2.1 billion, compared to the $ 150 billion that the AGM estimates to be wagered illegally each year, including $ 10 billion just for March Madness alone.
I guess legal businesses have the capital and the marketing intelligence to grab at least half of the illegal revenue over the next decade while growing the global pie in a delicious way. I can imagine the game as a platform for other financial endeavors, including loans. The question is which companies will be the big winners.
Crazy support. Betting on football and basketball, in particular, is a popular American pastime, but it wasn’t until a Supreme Court ruling in 2018 that sports betting received the blessing of the law in the world. nationwide. Years earlier, states began to pass their own laws, defying bans and opening the floodgates. According to ESPN’s tracker, updated through September 29, some 27 states have launched sports betting markets, including 11 online, and five other states have passed legislation to do so.
In the past, casino companies have fought legalization, but they are now embracing a brave new world by acquiring companies experienced in online betting not only on sports, but also elections and online versions of games. casino. Consider one of my favorites in the bunch, Caesars Entertainment, which operates 54 casinos in 16 states, including nine in Nevada alone. The Roman Empire-themed Caesars Palace Resort in Las Vegas has 3,960 rooms and 124,000 square feet of gaming space on 85 acres. The Palace’s huge sportsbook offers a 143-foot screen that shows horse races, soccer matches, boxing matches, and other events as they happen. (The stocks and funds I like are in bold.)
The company had entered into a joint venture with William Hill, a 77-year-old British company, to manage online gambling, a deal that allowed revenue to continue to flow during the pandemic when at one point casinos in Las Vegas have closed completely. In April, Caesars acquired 100% of William Hill for $ 3.7 billion.
Meanwhile, Entain, parent of the other venerable British bookmaker, Ladbroke’s, had become the subject of a bidding war. MGM Resorts International offered $ 11 billion for the company in January, but was eclipsed by a $ 22 billion cash and stock offer in September of DraftKings, which in August had paid $ 1.6 billion for Golden Nugget Online, with an Internet customer base of 5 million players who play online casino games.
Sports-mad Boston-based DraftKings increased revenue from $ 226 million in 2018 to $ 614 million in 2020 to about $ 1.3 billion in 2021 (not counting the Entain and Golden Nugget agreements). Despite this dramatic increase in sales, DraftKings is unprofitable, a condition that analysts say will persist until at least 2023. The company also lacks the ballast that revenue from thousands of hotel rooms and hotels provides. hectares of slot machines. But if you recognize the risk, DraftKings is an aggressive and potentially lucrative game on the advent of online gambling.
Weeks after the 2018 Supreme Court ruling, FanDuel, now considered America’s largest online gaming company, sold a 58% stake to the Dublin-based company. Flutter Entertainment, a deal that valued FanDuel at around $ 600 million. Flutter then bought 37% more a year ago for $ 4 billion, a valuation nearly 20 times the original 2018 purchase, an indication of the importance of online gambling. Flutter, my top pick in the industry, is a very experienced company, founded in 1958, with a diverse portfolio that includes PokerStars, the world’s largest online poker site; over 600 betting shops in the UK and Ireland; and the leading mobile betting app in Australia. Flutter’s market capitalization at $ 35 billion makes it the largest gambling company in the world. The shares have almost doubled in two years.
Wynn Resorts and Las Vegas Sands, two casino companies that have relied heavily on their casinos in Asia, have slowed the pace of online gaming. But a lesser-known Nevada company deserves careful consideration. Boyd Gaming, with modest casinos in downtown Vegas and others in nine states, has partnered with MGM to expand the reach of its online sports betting. Unlike other gaming companies, Boyd is expected to be solidly profitable in 2021, with a price-to-earnings ratio, based on estimated earnings, of just 14.
Another dark horse is Penn National Gaming, whose focus was on casinos at smaller racetracks, with accompanying brick-and-mortar sports betting. The company launched Barstool Sportsbook, an online betting application, and, through Penn Interactive, operates online slots and casino games. In August, Penn National struck a deal to buy Score Media and Gaming, a Canadian company with the third most popular sports betting app in North America. COVID has crushed Penn National, sales dropping by a third in 2020, but the business has recovered and sales and profits have risen sharply in 2021.
While it’s unclear who will win the online gaming wars, the arms vendors – in this case, software – should fare well. The best of them are GAN Limited, a Californian company based in London International gaming technology, whose stock has quadrupled since its COVID low. Entertainment Conglomerate Endeavor Group Holdings provides data feeds and videos to 45,000 sporting events per year.
Want to diversify? Sports betting and online gaming at Roundhill is an exchange-traded fund launched last year to take advantage of the online betting boom, and has delivered a sparkling 38% return in the past 12 months. Her highest attire is Rush Street Interactive, a Chicago-based online casino and sports betting company whose shares doubled between July and October.
VanEck Games has significant stakes in Flutter, DraftKings and MGM. An older ETF, the fund has generated an average annual return of 11% over the past three years, behind the S&P 500. But with gambling stocks, like all stocks, you’re betting on the future, not on the future. the past.