Looking to diversify your portfolio? Here is our guide to understanding gambling and casino stock investment
While 2020 could be categorised as a high-risk year for the equity market, recent movements spotlight the rapid growth and potential witnessed across the gambling and casino stock market. We highlight the most transcending gambling and casino stock traders have their eyes on - with the potential for a bull run in 2021. All data and figures are in accordance to the time of writing.
Disclaimer: The following is not intended as investment advice. Do your own research.
According to the ReportLinker, the global gambling market is forecasted to reach $647.9 billion by 2027 while accounting for the pandemic. In effect, the pandemic has accelerated the trend of online betting which, according to Grand View Research, is expected to reach $127.3billion by 2027. Additionally, land-based gambling venues are predicted to pick up after the pandemic ends as the vaccine roll out will greenlight traveling and entertainment.
Like all stock, gambling and casino stock fluctuate based on social, economic and political changes. A strong trend elicited over the past year was the industry entering the golden age of M&A. We observed that the health of a stock is closely related to regulatory changes or restructuring. For example, the £8.09bn takeover battle with MGM and Entain took an ugly turn as Entain's market cap fell sharply by 12.5% to £7.3bn after MGM dropped out.
Another example includes Google’s recent announcement that it has lifted the Play Store ban for gambling and betting apps, causing a boost in share prices. According to Yahoo, prices for Penn National grew by 4%, the Score rose around 7%, and DraftKings spiked up to 6%.
Key stock trends to keep an eye on
DraftKings (DKNG), a leading fantasy sports and online sport wagering provider, merged with Diamond Eagle Acquisition and SBTech back in 2019 which catapulted the company into the stock market. The reaction could be hinting towards a bigger picture, the U.S. becoming the home to sports betting (with an estimated value of $40billion according to Motely Fool).
American operator of casinos and racetracks, Penn National Gaming Inc. (PENN), is another pioneer in the casino stock market. The stock currently boasts a 222.27% one-year return. Investor’s Business Daily highlight that PENN shares are beyond buy range. Optimism reins as analysts from Jefferies and Stifel have raised their target prices to 91 and 118 respectively.
As the economy recovers and people have more disposable income, it is expected that land-based gambling venues could bounce back in 2021. Consequently, Investor Place recommend keeping an eye out for MGM Resort International (MGM), one of the world's leading global hospitality companies. Bank of America analyst Shaun Kelley contends that MGM has the potential to become a valuable “story” stock due to its brand strength. Furthermore, recent news of a partnership between BetMGM, a subsidiary of MGM and Entain Plc, and Richard Childress Racing is also expected to catapult MGM onto the frontline of the online gaming industry.
Evidently, the clear winners for 2020 were sport betting stocks, Morgan Stanley recommending to buy these stocks ahead of the curb. Gambling stocks like Penn National Gaming (PENN) and Draft Kings (DKNG) have in fact been some of the best-performing in 2020, and are expected to bring the same momentum into 2021.
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