People have been placing their bullish bets on the sports betting stocks of late, with the broader basket gaining considerable momentum. While the Magnificent Seven stocks stole the show (yet again) this earnings season, I think other corners of tech are more than worthy of the attention of growth-savvy investors. The gaming scene looks quite intriguing here as industry rivals duke it out for a larger share of the sizeable market.
If you watch sports, you’ve probably been bombarded with many sports-betting app commercials. Even if you’re not enticed by same-game parlays or the thought of winning a few bucks if your favorite team wins, it’s hard to ignore the hype following the digital sportsbook scene, especially as the digital gaming pure-plays begin to nibble at the share of traditional physical casino plays.
Indeed, digital sports books are an asset-light way to capitalize on a booming market. But with so many rivals, it can be tough to tell which firms really stand out. Let’s have a look at three that look compelling.
DraftKings (DKNG)
DraftKings (NASDAQ:DKNG) has been incredibly hot since bottoming out in 2022. Since then, shares have soared over 260%. And with few signs of slowing down, the $19.4 billion king of sports bets has been one of the most-watched stocks for the momentum chasers out there. Undoubtedly, chasing hot stocks can lead to quick losses if fortunes were to turn suddenly.
Recently, DraftKings was slapped with a notable downgrade from BNP Paribas’ Alistair Johnson, who sees headwinds on the horizon. Johnson notes that the company “must pull back on its investment in customer acquisition and retention” to hit current “profit margin targets.” I couldn’t agree more. DraftKings has been spending a lot of money to attract wagers in the booming market. The big question is what happens when DraftKings begins to cut back in its own “year of efficiency.”
Given how fiercely competitive the digital gaming scene is right now, I personally wouldn’t want to place a bet right here—not after last year’s euphoric surge. For now, I’m going to enjoy the show from the sidelines. However, I won’t stop you from placing a wager if you think DraftKings can continue running with the ball, even as it looks to slow the pace of spending.
Flutter Entertainment (FLUT)
Flutter Entertainment (NYSE:FLUT), the company behind the popular sport-betting app FanDuel (and other gaming brands), recently went live on the NYSE, putting it head-to-head against its top industry rival, DraftKings. Undoubtedly, when placing a sports bet, most consumers will flock to one of the two heavyweights.
Flutter’s public listing should help the firm take its marketing campaign to the next level as it looks to gain traction over DraftKings, especially in the American market. The U.S. total addressable market could be worth $37.5 billion, at least according to Jefferies. Given the U.S. is Flutter’s turf, I’d argue that FLUT stock stands out as one of the most intriguing (or perhaps spiciest) ways to play sports betting.
Though it’s still the early innings for the sports-betting plays, I view Flutter as worth a hefty premium to the peer group. The company boasts some very well-known gaming brands in its portfolio, from FanDuel to PokerStars. And it’s these brands that I believe are a source of a moat. At 3.24 times price-to-sales (P/S), shares don’t look too expensive either.
MGM Resorts (MGM)
MGM Resorts (NYSE:MGM) is a trusted brand for those looking to play physical and digital gaming. Though the brand may have lost some affinity with customers following last year’s ugly cyberattack, I still view MGM as having one of the widest moats in the entire gaming universe. It has the Las Vegas Strip covered, and its sports-betting app ad has the Great One (Wayne Gretzky) in its corner.
Undoubtedly, MGM’s marketing campaign has the potential to grab a share away from competitors in the sports betting market. It’s hard to ignore Wayne Gretzky when he appears on your TV screen. As the digital business grows, the physical casino business also looks quite attractive as the company looks to take bets from gamblers from whichever medium they choose.
Whether it’s the MGM Grand casino or BetMGM, it’s clear that MGM stock remains nothing short of compelling for those enticed to place a bet. I find MGM stock the most captivating of the three gaming plays in this piece, with shares going for a mere 15.1 times trailing price-to-earnings.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
