Online sports betting is booming. Since the pandemic started, in-person betting has increasingly given way to digitized betting, a move that’s been hastened as more and more states open up to legalized sports betting. Although the business may still be controversial in some quarters, no one can deny that the online gambling market is huge, nor that its growth potential is vast. In New Jersey (one of the first big states to allow gambling), $91.8 million in online bets were placed in November 2020 alone, a massive 86.9% increase on the previous year. It’s the same story in other states. Wall Street analysts are now predicting that sports betting will accelerate even further after the pandemic, with the market in the US reaching around $19 billion by 2023 to 2025. Whether you partake in the occasional flutter or not, there’s clearly money to be made in online gambling. If you want to get in on the action, here’s our pick of the top five sports betting stocks worth considering.
According to The Motley Fool, the hottest sports betting stock of 2020 was DraftKings. They aren’t wrong. Shares for the year jumped by a massive 406%, driven largely by the rapid boom in online betting resulting from the pandemic. Signing up Michael Jordon as a special advisor and partnering up with ESPN to become an exclusive provider of fantasy sports, along with a co-exclusive partner for gambling link-outs, didn’t exactly harm matters either: after all, if there’s one thing that a relationship with ESPN guarantees, it’s a rapidly growing customer base. In the third quarter of 2020, DraftKings reported that revenue was up by 42%, with its average monthly users increasing by a very significant 64%. With little indication that 2021 will mark a return to in-person betting, its projected revenue for the year is expected to hit between $750 million and $850 million. According to 24/7 Wall St, top Wall Street analysts are predicting that in 2021 and beyond, engagement with online leisure, pent-up appetite for sports, and political realities should position DraftKings to accelerate. If the industry continues to develop at the rate it did in 2020, the next few years should be very interesting for the company and its shareholders.
2. MGM Resorts
Although digital betting increased exponentially in 2020, brands that have a physical presence often have the edge on online-only companies. Not only is a bricks and mortar presence a requirement in certain states, but it can go a long way to increasing brand awareness and solidifying reputation. Of all the companies seeking to combine a real-world presence with a digital one, MGM Resorts is perhaps the one that’s managed it most successfully. Via the joint venture BetMGM, it now has a presence in 10 states, including Colorado, Indiana, Iowa, Michigan, Nevada, New Jersey, Pennsylvania, Tennessee, Virginia, and West Virginia. As more states allow betting, that number is likely to increase significantly in the long term. By utilizing the revenue from its physical casinos in the development of its online division, the potential for MGM to become a leader in the sector is vast.
3. Caesars Entertainment
While most investors still think of Caesars Entertainment as a casino operator, its iGaming and sports wagering footprints are growing rapidly. Before its acquisition by Eldorado Resorts in early 2020, Caesars had already developed a decently sized sportsbook business and iGaming unit. Since the acquisition, both departments have grown exponentially, thanks in no small part to Eldorado Resorts’ long-standing partnership with William Hill. The partnership gave Caesars Entertainment an immediate 20% interest in the bookmaker. Now, plans are afoot for Caesars to buy William Hill outright in a $3.69 billion takeover bid. Once finalized, the deal will effectively create a betting powerhouse.
4. Flutter Entertainment
Three years ago. a planned merger between FanDuel and DraftKing was called off after regulators expressed concern that the merger would result in the two companies controlling more than 90% of the U.S. market. DraftKings later went on to merge with a SPAC, while FanDuel joined forces with Paddy Power Betfair’s U.S. operations. In 2019, Paddy Power Betfair changed its name to Flutter Entertainment. A year later, Flutter merged with Stars Group, the parent company of the world’s largest poker site, PokerStars. Since then, Flutter’s fortunes have gone from strength to strength. During the first 6 months of 2020, Flutter held a 44% market share of online sports betting in the 5 states it operated from. With more states opening up to online betting, its foothold has increased significantly. In a statement issued in August 2020, it confirmed its anticipation for further growth over the coming year. “At our full-year results in February, we outlined how we expected to offer FanDuel’s online sportsbook to 21% of the U.S. population in 2021 (across nine legislated states). Since then legislation has also been passed in Virginia (2.5% of US population), with planned referenda in Maryland and Louisiana in H2 to potentially approve sports betting there also.”
5. GAN Limited
GAN Limited isn’t a name most people are aware of – or at least, not to the extent that they’re familiar with names like Caesars and DraftKings. Whereas MGM, Ceasars, and others focus on bet taking, GAN is more concerned with the background work involved in maintaining the sports betting sector. Based in the UK, GAN’s primary focus is developing software-as-a-service gambling solutions to the U.S. online casino and sports betting markets. Described by Profit Confidential as a “compelling small-cap technology solutions stock with tremendous long-term upside,” GAN may only have a short history operating as a public company, but its results to date have been more than impressive. In 2019, its revenues increased by 113.7% to $30.0 million. The upward trend has continued unabated since. The increase in online sports betting in the lucrative U.S. market will continue to feed into GAN’s profitability. The company also has strong prospects in Europe, which has a more established history in online betting. By providing novel solutions to help online companies better manage their operations, GAN stands to be one of the key beneficiaries in the ever-growing digital sports betting market.