Online sports betting and gambling stocks have taken Wall Street by storm in recent months as the US economy reopened and live sports returned to action.
Not surprisingly, the Roundhill Sports Betting & iGaming ETF (NYSE:BETZ), which has made new all-time highs in five of the last seven sessions, is up around 34% since its inception in early June, easily outperforming the S&P 500’s 8% gain over the same timeframe.
Below we highlight three stocks in prime position to further capitalize on the booming sports-betting craze, as more states around the country continue to legalize online and retail sports wagering.
1. DraftKings
DraftKings (NASDAQ:DKNG) has had a remarkable run so far this year as stay-at-home measures aimed at reducing the spread of the coronavirus outbreak fueled a boom in online sports betting and gambling. It recently announced a partnership with ESPN, and the shares bounced on the news that Michael Jordan has joined its board as a special adviser and taken an equity stake in the company.
Shares of the Boston, Massachusetts-based sports betting platform have surged a whopping 430% since going public through a special purpose acquisition company (SPAC) on April 24, compared to the S&P 500’s 21% gain over the same period.
The stock closed at $56.78 on Tuesday after touching a record high of $64.19 at the start of the week. At current levels, the fast-growing sportsbook operator has a valuation of roughly $11.9 billion, making it the most valuable company in the sports-betting industry.
DraftKings posted a mixed set of earnings for its second quarter on Aug. 14, as a majority of professional sports leagues remained on hiatus due to the ongoing COVID-19 pandemic.
It announced revenue of $75 million, beating consensus estimates of $66.4 million. However, net losses for the quarter were worse than expected, with the company delivering a loss of $0.55 per share for the three months ended July 31, compared to expectations for a loss per share of $0.20.
More importantly, DraftKings said it was debt-free with $1.2 billion in cash on its balance sheet. CEO Jason Robins said in the company's earnings report:
“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,”
Draftkings next reports financial results on Nov. 13 before markets open. Consensus calls for losses of $0.35 per share for its third quarter, while revenue is forecast to total $129.6 million.
2. Penn National Gaming
Penn National Gaming (NASDAQ:PENN) made headlines back in January, when it expanded into sports media and online betting by acquiring a 36% stake in Barstool Sports—the popular sports media company run by high-profile founder David Portnoy—for $163 million.
The Wyomissing, Pennsylvania-based company, which operates 41 casinos and racetracks in 19 states across the country, has seen its stock jump 166% since the start of the year, giving it a market cap of $10.4 billion.
Even more impressive, shares—which ended at $67.94 last night—have rebounded more than 1,700% from their all-time low of $3.75 on Mar. 18.
Penn easily beat earnings and revenue expectations in the second quarter, despite the staggered openings of several of its properties and the lack of live sports. Jay Snowden, President and CEO, said in the company’s earnings release on Aug. 6:
“Although visitation has yet to return to pre-COVID levels, in large part due to state mandated capacity restrictions and limited amenities, spend per visit has been notably strong, resulting in better than expected revenues,”
Penn is projected to report third quarter results on Thursday, Nov. 5 before the open. Consensus estimates call for the casino and sports-betting company to post earnings of $0.34 per share. Revenue, meanwhile, is expected to soar 230% quarter-over-quarter to $1.08 billion, benefitting in part from pent-up demand and the return of many of the major sports leagues around the world.
Beyond EPS and revenue, investors will be keen to hear further details on the success of its recently-launched Barstool Sportsbook app, which went live in the state of Pennsylvania in mid-September. Barstool, which has 66 million monthly users, plans to next launch its sports-betting app in Illinois and Colorado.
3. Boyd Gaming
Boyd Gaming (NYSE:BYD) is a smaller company in the sports-betting industry, with a market cap of $3.4 billion. The Paradise, Nevada-based company, which operates 29 casinos in 10 states, has a 5% ownership stake in FanDuel, an online sports-betting platform similar to DraftKings. Boyd also operates sportsbooks in many of its existing casinos.
Shares of the regional casino operator, which settled at $30.91 yesterday, have made an impressive recovery from the lows reached during the peak of the coronavirus-selloff in March, rebounding an astonishing 380%.
Boyd blew past estimates when it reported second quarter earnings on July 28, with revenue getting a boost from the casino operator reopening nearly all of its locations since closing them down in mid-May.
“Since reopening began, we are off to an excellent start,” Keith Smith, President and CEO said in the company’s earnings report.
“On a comparable basis at our reopened properties, we achieved company-wide growth and significant margin improvement while complying with state-regulated reductions in gaming capacity.”
“While overall visitation and revenues are down, spend per visit is robust,”
Boyd next reports earnings after the closing bell on Tuesday, Oct. 27. Consensus estimates call for EPS of $0.04 per share, compared to a loss of $0.98 in the last quarter. Revenue is expected to jump 178% Q-o-Q to $585.2 million.
In addition to the top- and bottom-line numbers, market players will also focus on Boyd’s update regarding the recent launch of its Stardust Social Casino mobile app as well as the expansion of its strategic partnership with FanDuel in the state of Pennsylvania.