Millions of avid sports fans have spent the last year at home, rather than in the crowds of stadiums and arenas. But there might be a silver lining -- 20 states have legalized sports betting and iGaming. In addition, six more states have passed bills to legal sports betting, which are set to be legalized in the months ahead. In contrast, most other states that have yet passed a bill have introduced one.
According to Goldman Sachs’ extremely bullish forecast for the online betting and gambling market, the industry stands to grow 40% per year if the entire country stays the course to legalization. This would put sports betting on track to be a $39 billion industry by 2033.
The biggest players might be the ones who have a vehicle to spread awareness of their brand far-and-wide. So, we’re breaking down the top four sports betting stocks that have the partnerships, attention and money on their side in attacking the U.S. market.
1. DraftKings ($DKNG)
Arguably the largest, and most recognizable, sports betting stock is DraftKings. According to Roundhill Investments, the sports betting company is the market leader in Indiana, West Virginia, Colorado, Oregon and New Hampshire. Because of its size, it’s no surprise that DraftKings has picked up some of the most high-profile sponsorships.
In September 2020, the company expanded an existing partnership with ESPN that helped prominently feature the company during programming. In March of this year, the company unveiled a partnership with DISH Network ($DISH) and became the official sportsbook of the UFC. And that just scratches the surface of their business partnerships.
2. Flutter Entertainment ($FLTR.LN)
Flutter Entertainment is a global sports betting and iGaming company. Flutter owns 95% of the sports betting company FanDuel as of December 2020. According to Roundhill Investments, they are the market leader in New Jersey and Pennsylvania.
In the last few months, FanDuel has become one of the biggest sportsbooks in America by volume. This has encouraged Flutter to consider spinning off FanDuel as its own company. Before that happens, the company will have to settle a lawsuit filed against them by Fox Corp. ($FOXA), who is entitled to an option to buy nearly a fifth of the company. In the last year, Flutter (which trades in the UK as $FLTR) has risen 105%.
3. Penn National Gaming ($PENN)
A year ago, Penn National Gaming made our Bullish Rippers list after announcing their plan to buy 36% of Barstool Sports. At the time, many might have been perplexed by the fact that a lesser-known casino and racetrack operator was buying the publisher. But a well-known brand in the sports sphere like Barstool makes it an excellent venue for hosting a sportsbook.
In the year since then, Penn National Gaming has leveraged Barstool and the Barstool Sportsbook to run over 635%. The company was added to the S&P 500 in March. This came even as Penn reported a 23% drop in revenue in Q4 because of physical property closures due to COVID-19. Although Barstool Sportsbook is new, it might be one of the best positioned to take on the market.
4. Bally’s Corporation ($BALY)
A few months ago, FOX announced that they would be selling off their 21 regional sports networks to Sinclair Broadcast Group. The nearly $11 billion sale collected political scrutiny because Sinclair itself is a controversial company. The sale eventually cleared, allowing Bally to acquire the naming rights to the networks in November 2020. When they acquired the rights, they also offered a warrant to Sinclair to acquire a sizable stake of Bally’s. The news of the naming rights purchase caused Bally’s to go on a monster run, doubling since November.
Bally’s operates a dozen casinos and racetrack locations throughout the United States. However, the company has not launched a mobile sportsbook in its own name yet. For now, they enlist the services of FanDuel at some of their physical casino locations. There are signs in the new Sinclair-Bally’s arrangement that point to that changing.
The company received a temporary sports wagering permit in Virginia in March, pending acceptance of similar licenses in at least a dozen other states. Bally’s is working backwards to get to consumers. However, having a major regional sports network in your name is probably a good starting point to getting there.
Going Long on Sports Betting
Though these four stocks are likely strong bets for capitalizing on the sports betting trend in the U.S, there are ways to capitalize on the industry globally. One way is buying an ETF like Roundhill Sports Betting & iGaming ETF ($BETZ) or VanEck Vectors Gaming ETF ($BJK). This is an easy way to gain access to an actively managed portfolio of sports betting companies like the ones above, including ones in international markets that might be more difficult to acquire.