Online Gambling Companies Stocks

  

In an interview with MarketWatch in 2002, the late Hunter S. Thompson said the only stock he ever bought was in the Boston Celtics. But in 2020, perhaps Thompson might reconsider, since the hot trend appears to be US online gambling operators becoming publicly traded companies.

And virtual reality gives the online gaming world a new dimension. You can be sure that publicly traded casino companies will try to take advantage of upcoming technology and/or new markets. That said, let’s look at 7 public casino companies that are eyeing major growth over the coming years. Las Vegas Sands Corp. It is predicted that by the year 2022, all around the world, sports fans will be having as much as $1 trillion invested in online betting per year. Five gambling stocks with great potential in 2020. Given below are five gambling stocks that one should keep an eye on in regard to gambling in legalized sports. MGM Resorts (NYSE:MGM). 7 Best Sports Betting Stocks to Wager On Sports betting stocks are taking off, and expect the industry to keep expanding at a rapid rate. These are seven gambling names you need to know.

Everything came to a roaring halt when the coronavirus ravaged the US. Sports and sports betting were all but nonexistent. It started with March Madness and then spread like a fever to other leagues. By April, your betting options were Russian table tennis and Belarusian soccer. When the US Supreme Court put an end to the Professional and Amateur Sports Protection Act (PASPA), it unknowingly opened the doors to gambling talks inside state capitals.

But in the last few months, it’s not the legalization of sports betting that’s been receiving widespread attention, but rather, well-established gaming companies taking their online business public. Online casinos are making record profits during the pandemic, and a few significant companies are pouring investment money into online segments, betting on long-term gains.

However, investing in online gambling can be just as rewarding as betting on the Boston Celtics to sweep the lifeless Philadelphia 76ers. It can also be as dangerous as betting on them to do it again against a more formidable foe.

Here’s a look at three high-profile companies leading the charge.

DraftKings leading the crusade

This all started in April when popular daily fantasy sports (DFS) turned sports betting operator DraftKings (DKNG) debuted on Wall Street. The company’s opening price of $20.49 rose to an all-time high of $44.70 and is currently hovering around $38.91 as of 10:26 CST.

The company is known to suck the air out of a room. DraftKings Sportsbook is the leading sports betting operator, and whenever it does something as drastic as becoming a publicly traded company, others pay attention.

In its most recent earnings report, DraftKings said, “The company is well-positioned to continue to deliver on its key priorities, which include entering new states at the earliest opportunity, investing in product and technology to create new offerings for American sports — and acquiring and retaining customers.”

We don’t need to sit here and ramble on about the inner workings of DraftKings. The company knows DFS, it knows sports betting, it has a huge customer base and it has the potential to become sports betting/online gambling royalty. It is also in online casinos now.

The level of success DraftKings has been able to achieve in the two years since the repeal of PASPA is unmatched. But in doing so, it placed a giant target on its back, with other operators looking to overtake the behemoth.

Golden Nugget is a leader in online casino gaming

Stocks

Sometimes, when you have a game plan, you want it to be a secret — like when the Arkansas Razorbacks unveiled the Wildcat formation to utilize their three-headed monster, running backs Darren McFadden, Felix Jones and Peyton Hillis. Not only did they take other teams by surprise, but Arkansas also managed to finish the ’06 season 10-4.

This was not the case for Golden Nugget — no secrets here. The company revealed its strategy to break off its online gambling arm and list it on the Nasdaq exchange.

Golden Nugget is the largest online casino in New Jersey and posted a net income of $11 million in 2019. The company also plans to launch online casino games in Pennsylvania and Golden Nugget sportsbook in Michigan in 2021.

In a transaction plan similar to DraftKings’, Golden Nugget’s online gambling business will be acquired by Landcadia II, a publicly listed special purpose acquisition company (SPAC).

Once the deal is complete, Landcadia II will change its name to Golden Nugget Online Gaming Inc. (GNOG).

The move is genius. What Golden Nugget does best is online casino games. When it becomes a publicly traded company, owner Tilman Fertitta can raise additional funds at a time when COVID-19 has crippled land-based operations.

In football terms, this move screams “We are going to run the ball right down your throat — try to stop us.”

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Rush Street Interactive taking a page from its rival DraftKings

If it works for your competitor, it just might work for you. That appears to be the mindset of Chicago-based Rush Street Interactive, as it too will become a publicly traded company once its deal with dMY Technology Group is complete.

Rush Street has a tally of first-to-market achievements under its belt. It was the first company to launch online casino gaming in New Jersey and the first to launch online sports betting in Pennsylvania, Indiana, Colorado and Illinois.

According to the Chicago Business Journal, the transaction value of the combined companies will be around $1.78 billion. Once the transaction is complete, dMY Technology will change its name to Rush Street Interactive Inc. (RSI).

The move is not surprising and is a product of a rapidly changing industry looking to compete with top operators like DraftKings and FanDuel.

MGM Resorts and the value of investment

Lastly, we have MGM Resorts and the 10-figure investment from billionaire Barry Diller due to the outlook on online gambling. Diller’s company, InterActive Corp, purchased a 12% stake in MGM worth around $1 billion.

In a Fox Business report, Diller said the online gambling industry is worth $450 billion on a global scale and he has been looking to enter the online space for some time.

The substantial investment helps reinforce the narrative that online gambling is where the industry is heading. New Jersey online casinos recorded $84.9 million in revenue for June. Pennsylvania netted $55.8 million, and some market analysts anticipate Michigan’s online gambling value to be worth more than either of them.

The US stock market is extremely volatile and continuously in flux. To that extent, it might be wise to stick with Thompson’s advice and back the Celtics. They swept Philly 4-0 and now take on the defending NBA ChampionToronto Raptors in a best-of-seven series beginning Thursday, Aug. 27.

Published on April 20th, 2020 by Harvi Sadhra

This is a guest contribution by Harvi Sadhra of Hashtag Investing. Hashtag investing is an exclusive community for active investors to get real-time feedback and discover compelling stocks and strategies any time.

At the height of COVID-19, gaming stocks are making new highs. As the world is locked indoors due to the pandemic, more people are joining the gaming world.

While gaming stocks are typically not the type of high quality dividend growth stocks we cover on Sure Dividend, they have performed especially well as of late.

Gaming stocks like Zynga (ZNGA) and Activision Blizzard (ATVI) recovered from the March sell-off and rose more than 20% and 12% YTD (year-to-date), outperforming the S&P 500 Index, which fell 14%.

Welcome To The Lucrative World Of Gaming

Even before the pandemic, the video game industry was lucrative, growing 7.2% YoY (year-over-year) in 2019. Video games are gradually becoming the preferred form of entertainment. Data from Newzoo and Comscore shows that global video game revenue of $148.8 billion surpassed worldwide movie box office collection of $42.5 billion in 2019.

The significant change in the technology and business models of the gaming industry is driving growth. Video games have expanded beyond consoles to PCs and mobile. Thanks to high-speed internet, game developers have gone digital. Instead of buying video game packages, gamers can download games, subscribe to cloud gaming services, and make in-gaming purchases like new missions and player skins to enhance their gaming experience.

Similar to other physical sports, video games have sporting events called esports, where professional gamers compete in front of millions of viewers. According to Newzoo, 443 million people watched esports in 2019, and this number is expected to reach 495 million in 2020. The secret to succeeding in gaming is developing games that generate a loyal fan base for sequels, prequels, and merchandise goods.

2020 – A Good Year For Gaming

2020 is a good year for gaming stocks. We bring to you the top five NASDAQ gaming stocks which you should have in your portfolio. The stocks were selected based on their liquidity, growth, and fundamental strength.

Top Gaming Stock #1 – Activision Blizzard

Activision Blizzard is the world’s largest pure-play video game company with $6.5 billion in annual revenue and $51.8 billion market capitalization. It earns revenue by selling video games and services for game consoles (30%), PCs (26%), mobile devices (34%), and others (10%). Game services include in-game purchases and merchandise while the others segment includes proceeds from esports events.

Activision Blizzard has one of the most robust franchisee catalogs including World of Warcraft, Call of Duty, StarCraft and Bubble Witch, Diablo, and Overwatch. It earns 76% of its revenue from digital channels and 24% from retail and other sources. Activision Blizzard also broadcasts professional Overwatch matches on Disney’s (DIS)ABC networks, the Disney Channel, and ESPN.

In 2019, Activision Blizzard’s revenue fell 13.5% YoY, while its free cash flow rose 3.4% YoY to $1.7 billion. With a net cash position of ~$3.2 billion, it is well-placed to withstand the crisis and pay a dividend. The stock is making a new 52-week high of $67 amidst the pandemic.

Top Gaming Stock #2 – Electronic Arts

Electronic Arts (EA) is another video game giant with annual revenue of $5.5 billion and a market cap of $32.8 billion They offer games and services for consoles, mobile, and PC, and earn ~75% of revenue from digital channels. However, EA is more dominant in game console sales, earning 70% of its revenue from here. It earns 15% revenue each from PC and mobile games, and is witnessing increasing growth in mobile games.

EA has some of the best sports game franchises like Madden NFL, NCAA Football, NBA Live, and FIFA, and it is monetizing these games on esports. It also has an exclusive agreement with Disney for the rights of the Star Wars franchise. The franchisee licenses limit EA’s scope for merchandise sales. Its largest source of revenue is live services like in-game purchases, extra content, subscriptions, and esports. EA plans to monetize its games like Apex Legends and Battlefield through esports.

EA has a stronger cash position than Activision Blizzard. EA generates a higher free cash flow of $1.76 billion and has a more substantial net cash position of $4.6 billion. Its stock rose 5.7% YTD to its 52-week high of $114.47.

Online Gambling Companies Stocks List

Top Gaming Stock #3 – Take-Two Interactive

Unlike EA and ATVI, Take-Two Interactive (TTWO) is a smaller player with estimated annual revenue of $3 billion and a market cap of $14 billion. However, similar to EA, Take-Two has a larger exposure to game consoles, which contribute to 85% of its revenue. It earns the remaining 15% revenue from PC and other platforms. It has less exposure to esports but has the potential to expand.

Online Gambling Companies Stocks On The Rise

Take-Two’s biggest franchise Grand Theft Auto has the potential to become an esports game. Its other popular franchises include Red Dead Redemption, NBA 2K, and WWE 2K. Unlike EA that earns more than half its revenue from live services, Take-Two earns only 37% of its revenue from live services. Its major source of income is full game spending.

Take-Two Interactive is estimated to have a free cash flow of over $500 million and a net cash position of over $2 billion in fiscal 2020.

Top Gaming Stock #4 – Zynga

Another smaller player in the video game space is Zynga (ZNGA), which widely caters to the mobile platform. All its mobile games are free and it earns most of its revenue from in-game purchases and other live services. Some of its biggest franchisees are Mege Dragons, Empire & Puzzles, and Slots. It draws 90% of its revenue from mobile and 10% from advertising.

In 2019, Zynga’s revenue rose 46% YoY to $1.32 billion, and free cash flow rose 52.5% to $239 million. It has a net cash position of $790 million. Zynga is a high-growth stock increasing 21% YTD and has a market cap of $7.12 billion.

Online Gambling Company Stocks

Top Gaming Stock #5 – NetEase

Adding to the above four American companies is Beijing-based NetEase (NTES), which develops PC and mobile games and also distributes games of Activision and Microsoft’s Mojang in China. NetEase largely caters to China, Japan, and other Southeast Asian markets. It has franchises like Westward Journey, Knives Out, and Identity V. Apart from gaming, it offers other online services like advertising, email, e-commerce, and music streaming.

NetEase revenue rose 15% YoY to $8.4 billion and generated free cash flow of $1.95 billion in 2019. NTES stock rose 6.1% YTD and has a market cap of $46.2 billion.

Online Gambling Companies Stocks

Good Gaming Mix

The above list is a mix of large players such as ATVI, EA, and NTES, high growth stock ZNGA, and a mid-cap stock TTWO. ATVI, EA, and TTWO peaked in Q3 2018 and then came crashing down as China froze gaming license approvals. These three stocks performed in line with the S&P 500 Index in 2019. Now, they are on a growth spree and have the potential to reach their 2018 levels as the covid situation, and regulatory environment works in their favor.

Online Gambling Companies Stocks History

On the other hand, ZNGA and NTES outperformed the market in 2019 and see strong growth momentum in 2020 as well.