Who would want to be a casino investor, given the events of the past 12 months or so? The answer to that is not, in point of fact, as clear-cut as it might seem. For sure, businesses operating in the entertainment sector have been crippled by closures, restrictions and government recommendations that people stay at home. Entertainment hubs like Vegas, Atlantic City and Reno have been hit hardest of all. But while traditional casinos have been feeling all the pain, their online counterparts have enjoyed their best year in history.
The trend is not actually a new one, and there is plenty more going on here than the pandemic. Long before anyone had heard of lockdowns and social distancing, there were winds of change blowing through the industry. Just as movie theaters are feeling the pressure of streaming services, so the online casino market has long been gathering momentum at the expense of traditional land-based alternatives. What’s happened over the past year has only served to accelerate the process.
It makes the online gambling market – or at least, businesses in the sector with a strong online presence – a tantalizing option for investors. Here, we take a look at five of the real high rollers in the gambling world.
Gambling is not all about slots and roulette wheels. The sports betting niche is expected to see immense growth over the coming years, with commentators predicting it will be worth at least $19 billion per year by 2025. DraftKings has positioned itself to be at the forefront of that growth, and following its $3.3 billion reverse merger last year, it floated on the NASDAQ and its stock has only gone one way, increasing by more than 35 percent in 2021 alone.
By combining traditional sports betting with fantasy sports, it is able to offer something extra and has formed close ties with the major leagues, teams and broadcasters. It was recently described by one analyst as “a must-own for growth investors.”
The name might not be immediately familiar, but Flutter owns some of the biggest brands in the gambling sector, covering both casino gaming and sports betting. Its Paddy Power brand is favored by the likes of FlashCasino.org, while in the US it is probably best known for FanDuel sports betting and fantasy leagues. Other brands within the Flutter portfolio include Betfair, PokerStars, FOX Bet, and Oddschecker, to name just a few.
Flutter, therefore, has a strong brand presence across the gambling world and is in a perfect position to leverage its experience in the mature European market to take full advantage of the new opportunities arising as more US states reform their gambling laws. In the year to date, Flutter shares have gone up 12 percent.
Our third entrant might seem an unlikely choice when we are talking about online operators. After all, MGM is best known for its giant entertainment complexes, such as the MGM Grand and the Bellagio on the Las Vegas Strip or the Empire City in New York. However, MGM Resorts has also been quietly building an empire in cyberspace that is just as impressive, especially via its BetMGM mobile app, and this has provided overall stability despite the potentially catastrophic impact of recent events on its brick and mortar facilities.
Looking forward, the combination of a famous name, some iconic land-based facilities and an increasing market share online, plus a growing presence in the sports betting world, makes MGM Resorts a compelling choice. While some might be concerned at the US-centric focus, it has the presence and gravitas to truly dominate the market and to generate impressive returns for investors.
Penn National Gaming
You don’t always need to invest in a huge global brand in order to get a good return. Here’s a business that started life running sportsbooks at the racecourses in Pennsylvania when pari-mutuel betting was legalized in the state in the late 1960s. It then expanded by acquisition into the casino sector at the turn of the millennium.
Over the past couple of years, the business has again shown its knack for identifying when and where to branch out and has become established in the online casino gaming and sports betting area. This latter has been given a significant boost by the strategic partnership entered into earlier this year with Barstool Sports, whereby it has exclusive access to the wildly popular Barstool mobile sports betting app. This places it in a great position to gain broader recognition beyond its traditional homelands – and is making the likes of DraftKings sit up and take notice.
Finally, another operator that is best known for serving a regional market. As Boyd has its heaviest presence in Las Vegas, it might seem a shaky buy for investors, but the beauty of this operator is that it is not directly reliant on the state of tourism on The Strip.
In fact, the operator’s main revenue streams are local casino operations spread across 10 states and one of the most mature online casino gaming and sports betting offerings of any provider in the US. Its localized focus has made it the best-performing physical casino operator this year to date, while its online platforms have been growing consistently for the past two years. It’s a winning combination, of which investors would do well to take note.