Consider these stocks to bet big on sports gambling.
In 2018, the U.S. Supreme Court struck down a law preventing states from legalizing sports gambling. Since that landmark ruling, the U.S. sports gambling business has boomed, including the launch of a number of sports betting apps and online sports betting, or OSB, platforms. Zion Market Research estimates the global sports betting industry will generate $179.3 billion in revenue per year by 2028. U.S. companies generated $211 million in OSB gross gaming revenue in February, up 39% compared with a year ago. Here are seven top sports betting stocks to watch in 2022.
Penn National Gaming Inc. (ticker: PENN)
Penn National Gaming is a regional U.S. casino operator that runs 44 casino and racetrack properties. Penn also has a 36% ownership stake in Barstool Sports. In addition to physical sportsbook operations at Penn casinos, Bank of America analyst Shaun Kelley estimates, Barstool accounts for about 5% of OSB gross gaming revenue in the five largest U.S. markets: New York, New Jersey, Pennsylvania, Michigan and Indiana. Kelley says Penn’s core business is strong, and its online business is the closest to profitability among its peers. Bank of America has a “buy” rating and $60 price target for PENN stock, which closed at $36.86 on April 12.
DraftKings Inc. (DKNG)
DraftKings is a daily fantasy sports and online sports betting company. Unlike the casino operators on this list, DraftKings is a pure play on online sports betting. DraftKings accounted for 30% of OSB gross gaming revenue in the critical top five states in February, more than any other company. Kelley says DraftKings has generated some impressive growth, including 46.8% revenue growth in the most recent quarter. However, he says its aggressive marketing spending likely means DraftKings won’t be profitable until at least 2024. Bank of America has a “neutral” rating and $25 price target for DKNG stock, which closed at $16.41 on April 12.
Flutter Entertainment PLC (PDYPY)
Flutter Entertainment is an Irish company that owns popular gambling brands, including FanDuel, Paddy Power, Betfair, Fox Bet, Full Tilt Poker and PokerStars. In February, FanDuel was a close second to DraftKings in U.S. OSB gross gaming revenue, with 28% market share in the top five states. Flutter trades on the over-the-counter market in the U.S., but it’s planning to spin off FanDuel and list it on a major U.S. exchange. Flutter will likely first need to settle a legal dispute with Fox Corp. (FOX, FOXA) over the pricing of Fox’s 18.6% ownership stake in FanDuel.
Churchill Downs Inc. (CHDN)
Churchill Downs is a regional casino and racetrack operator and owner of the Churchill Downs racetrack, home of the Kentucky Derby. Churchill Downs also owns TwinSpires, a horse racing, sports betting and online casino platform. Kelley says Churchill Downs is generating impressive earnings growth and has a unique, differentiated asset portfolio. The company acquired Peninsula Pacific Entertainment in February for about $2.5 billion. Kelley says the deal will add about $2 per share in free cash flow and boost Churchill Downs’ organic revenue growth. Bank of America has a “buy” rating and $285 price target for CHDN stock, which closed at $203.73 on April 12.
Caesars Entertainment Inc. (CZR)
Caesars Entertainment owns and operates dozens of casino properties throughout the U.S. It also owns the Caesars Sportsbook app, which accounted for about 13% of February’s U.S. OSB gross gaming revenue in the top five markets. Kelley says Caesars reported larger-than-expected losses from its digital business in the fiscal first quarter and has shifted its focus from national advertising campaigns to a more tactical, focused approach to marketing. After four years of net losses, Kelley projects that Caesars will turn a $1.62 earnings-per-share profit starting in fiscal 2023. Bank of America has a “buy” rating and $110 price target for CZR stock, which closed at $67.02 on April 12.
MGM Resorts International (MGM)
MGM Resorts operates casino resorts in the U.S. and China. BetMGM is MGM’s sports betting division, and it accounted for about 13% of the February OSB gross gaming revenue in the top five markets. Kelley says BetMGM accounts for 28% of the total U.S. internet gaming market. While MGM’s Las Vegas properties have been hot in recent months, its Macau properties have lagged throughout the latest COVID-19 outbreak in China. In addition, BetMGM is not yet profitable and is a drag on overall earnings. Bank of America has a “neutral” rating and $55 price target for MGM stock, which closed at $39.55 on April 12.
Boyd Gaming Corp. (BYD)
Boyd Gaming is a U.S. regional casino operator that runs 28 gaming properties in 10 states. Boyd has partnered with FanDuel since 2018 to develop sports betting and online gaming opportunities. FanDuel has opened retail FanDuel Sportsbook locations at Boyd Gaming properties, and the two companies have partnered to launch mobile sports betting apps in several states. Boyd is a rare value play among sports betting stocks, trading at only 10.8 times forward earnings. Kelley says its $400 million in planned 2022 buybacks demonstrates the strength of its balance sheet. Bank of America has a “buy” rating and $80 price target for BYD stock, which closed at $61.05 on April 12.
Best sports betting stocks to watch:
— Penn National Gaming Inc. (PENN)
— DraftKings Inc. (DKNG)
— Flutter Entertainment PLC (PDYPY)
— Churchill Downs Inc. (CHDN)
— Caesars Entertainment Inc. (CZR)
— MGM Resorts International (MGM)
— Boyd Gaming Corp. (BYD)
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7 of the Best Sports Betting Stocks to Watch originally appeared on usnews.com
