Investing in the stock market seems a lot like gambling at times, and some investors love to combine the two. Gambling stocks had a tumultuous few years leading into 2020, as the US Supreme Court stopped a federal ban in 2018.
Then the coronavirus pandemic shut down the travel and tourism industries, putting even more emphasis on internet gaming for revenue. Of course, even sports betting suffered from the temporary shutdown of professional sports leagues.
With the economy on its way to reopening and recovering, investors wonder which are the best gambling stocks to Buy in 2021.
One trend that remains consistent throughout the generations is that people turn to gambling in times of financial hardship. It’s traditionally low-income earners who buy lottery tickets, but people of all income brackets are prone to bet their shirt on black.
Which gambling stocks can investors bet on without losing their shirts? This is a list of some of the top gaming stocks.
Flutter Entertainment Owns Market Leading Brands
Flutter Entertainment ADR (OTCMKTS:PDYPY) is an Irish holding company that carries some of the biggest online bookies under its umbrella. The company’s brands include Paddy Power, Betfair, Pokerstars, FanDuel, and FOX Bet.
The company expanded globally through an aggressive acquisition spree in the late 2010s. It now operates in the U.S., Canada, Australia, Italy, Georgia, and the U.K. and is a global internet gambling leader.
Because of its global footprint, the company benefits as global gaming laws relax around the online market. This market is expected to grow to $100 billion+ in annual revenue by 2024, and the trend towards virtual gaming only accelerated the transition from physical to digital casinos.
Flutter ended 2020 with a market capitalization of over $30 billion, making it one of the largest gambling companies on the planet, and it’s trading at just over five times forward revenue and 20 times forward earnings.
When the pandemic hit, share prices plunged to a 52-week low of $31.35 before tripling in value and ending the year at over $100 per share. This is largely attributable to the influx of online gamblers stuck at home during quarantines.
It’s unclear how much of the new revenue influx the company will sustain when the economy recovers, but there is also plenty of time to wait before that happens.
DMY Technology Group Owns Sports Data
DMY Technology Group, Inc. (NYSE:DMYD) is a special purpose acquisition company that focuses on the gambling industry. The company’s purpose is to acquire assets, merge companies, and do whatever it takes to reorganize them into profitability.
The company went on a buying streak in 2020. It merged in July with Rush Street Interactive, a growing online casino and sports betting company, in a $1.78 billion deal. When the deal completed in January 2021, the combined company changed its listing to RSI on the New York Stock Exchange.
It doesn’t include the $1.5 billion deal DMY made with Genius Sports (DMYD), which is a leader in providing sports data. This leading sports data and technology provider merged with DMY to create GENI stock, which is expected to be listed in 2021. It provides data and broadcasts to global sportsbooks, making it somewhat of a Bloomberg for sports betting.
Each time this blank check company performs this special acquisition and merger, shareholders gain shares in the new company.
Because of this, the DMY Technology’s stock price went on a hot streak in the 2020 holiday season, ending the year with a market cap near $550 million. As the industry grows, its shares in different companies should grow with it.
Of course, the economic recovery may take another two to three years to reach the casino industry. Traditional casino companies like MGM were pummeled with billion dollar losses in the pandemic’s wake.
Holding equity stakes in so many gambling companies exposes DMY investors to a high level of risk in one industry.
DraftKings Valuation Is High But So Is Growth
Draftkings Inc (NASDAQ:DKNG) is a sports betting and fantasy sports industry leader that kicked off a buzzy IPO season in 2020. After going public through a special purpose acquisition company (SPAC) in late April with 336 million outstanding shares, it launched a second stock offering in June for an additional 16 million.
The move gave the company a market capitalization around $18 billion by year end, making it a more valuable company that Sands or MGM Resorts.
This dilution didn’t stop investors from piling into the stock and driving share prices as high as $64.19 during the pandemic.
Much of this happened when professional sports finally returned in their bubble seasons. With nothing much else to do for entertainment, people flocked to sports. Fantasy leagues and sports betting skyrocketed, and company stock prices went with it.
Although 2021 could mark the possible fall of “pandemic brands” like Peloton (PTON), it’s unclear how the market will react to online fantasy sports when the economy recovers.
What we do know is both sports betting and fantasy sports are growing in popularity. Research and polling found one in five Americans over the age of 18 are involved in each sports betting and fantasy sports.
This is a 6 percent growth from 2014, and the NFL, NBA, and MLB are the leading draws, although UFC, esports, golf, and even reality shows like “The Bachelor” all have avid gambling communities online.
So long as DraftKings can continue to serve the demand for online betting, it should remain successful, despite legal and regulatory challenges associated with its industry.
Churchill Downs Racetrack Could Hurt Revenues
Churchill Downs, Inc. (NASDAQ:CHDN) is the parent company for the Churchill Downs racetrack, but it also expanded into casinos and online betting. This makes it a horizontally and vertically integrated gambling company that more than tripled in value since March 2020.
At that point, it hit a low of $52.90, as widespread municipal shutdown orders made it clear that social gatherings and sporting events like the Kentucky Derby would be delayed from COVID.
The pandemic Derby commenced in September, which combined with online gaming revenue from its TwinSpires division led to $337.8 million in net revenue and $43.2 million in net income for the quarter.
Revenues and earnings also outperformed the third quarter of 2019, and that year-over-year growth renewed investor interest.
And Derby fans have a lot to look forward to with the 2021 event scheduled for April.
Penn National Gaming Owns 41 Casinos
Penn National Gaming, Inc (NASDAQ:PENN) is a Pennsylvania racetrack and casino operator that also owns over one third of Barstool Sports. The company’s stock price plunged to a low of $3.75 when professional sports and public gatherings were closed.
But a chilly spring led to exponential growth, as it ballooned to a nearly $100 per share by year end. Penn National then deflated a bit and started the new year with a market capitalization of just over $13 billion.
It owns and operates 41 casino properties in 19 states, which accounts for 50,000 machines, 1,300 table games, and 8,800 hotel rooms. This gives it a true omnichannel reach across regions both physically and digitally.
As more states allow online sports wagers, the company stands to benefit from the growing audience on all fronts. Even casual fans who don’t gamble follow Barstool and can be marketed to, and it’s an easy transition to its Barstool Sportsbook.
The crash bottomed it out with a $5.26 per share low, but it increased revenue to $1.13 billion by the third quarter. It’s still down from 2019 on that end and could sink more in 2021 as its CFO leaves.
Caesars Entertainment Sells Data To Competitors
Caesars Entertainment Inc (NASDAQ:CZR) is a golden phoenix in the casino industry. The merger of Caesars and Eldorado Resorts formed a gambling juggernaut that includes some big names in Las Vegas, Atlantic City, and more.
The combined company has $16.2 billion in debt and only $463 million in free cash flow, but it also holds a lot of assets.
Its biggest post-merger move was the William Hill acquisition. This sports data company provides deep analytics and statistics for a variety of sports leagues for sports bookmakers to track results. By controlling the flow of data, Caesars shrewdly placed itself to milk more revenues from sports fans through the 2020s.
Instead of competing with other online sports betting marketplaces, Caesars effectively sells shovels during the gold rush by providing data to its would-be rivals, turning them instead into clients and partners.
Now if it can only pay off its debts and get its physical casinos and resorts profitable again.
Fubo TV Growing Fast But Highly Volatile
Fubotv Inc (NYSE:FUBO) is one of the most turbulent and controversial stocks of the 2010s. While not yet a household name, the sports-centric streaming stock came closer than ever to that status in recent months.
Both bulls and bears debate the value of this business as fiercely as rival fans in any sport. On one hand, the company’s investors include Disney, ViacomCBS, AMC Networks, and Sky. That’s a great pedigree, but Quibi had big-name backing and failed to breakthrough too.
Still, the company benefited from the rise in online sports betting, adding 72 percent more paid subscribers to end the year at 545,000. This gave it fourth quarter revenue of nearly $100 million and proved its value among fans and investors.
It’s not an investment for the weak of heart though, investors are used to seeing double- and triple-digit growth and losses in the course of a single day.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.