Who’s more excited about the vaccine than those who have been locked down for months and unable to travel?
The answer is casino operators and casino stockholders.
While some casinos have reopened, they are not seeing a big boom in business. Many folks are still wary of traveling. It also doesn’t help that the daily news is full of warnings from various agencies about inside activities and the heightened risk of coronavirus infections.
Some diehards have made their way to the casinos, but business is nowhere near peak levels.
The vaccine will help change that. But it will be at least six months before gamblers start heading back in more significant numbers.
It is probably too soon to start betting on a full recovery in casino stocks.
But there are a couple gambling stocks on the rise that don’t need casinos at all.
One in particular is steeply undervalued right now…
Sports Betting Stocks Are Taking Over
Online sports betting is legal in 12 states, and six more have passed legislation that have not yet implemented the infrastructure to support betting. Over the next few years, we will see the majority of states legalize online sports gambling.
They need the money.
If neighboring states legalize online sports betting and your home state does not, you can just cross the state line and make your bets.
Your state gets zero tax revenue when that happens.
Online sports betting and gambling is going to be an enormous business. That’s why MGM Resorts (NYSE: MGM) made an $11 billion attempt to buy out British online gambling giant Entain Plc. (OTCMKTS: GMVHY).
It’s also why Entain turned it down as too low to reflect its online gambling company’s real value.
Entain and MGM are already partners in BetMGM, an online sports betting operation that currently operates in nine states. The deal could still happen, but MGM will have to dig a lot deeper to get it done.
We have already seen a U.S. Casino operator, Caesars Entertainment Inc. (NASDAQ: CZR), buy a British online firm, William Hill, in the last year. In that deal, Caesars paid $3.6 billion to expand its sports betting operations.
Most of the stocks touted to take advantage of online sports betting are existing companies with large brick-and-mortar casinos. Or, they are British companies that could expand into the United States as more states legalize online betting.
Many of them – including the parent of FanDuel here in the United States, Flutter Entertainment (OTCMKTS: PDYPY) – have seen their stock more than double in recent months. Traders began to bet on the future of sports betting in the United States.
And one online sports betting stock is still awaiting its biggest pop. Here’s a pure play on the very bright future of online sports betting in the United States.
Best Sports Betting Stock to Buy
DraftKings Inc. (NASDAQ: DKNG) was one of the biggest stories of 2020, but the future could be much brighter with the best yet to come.
DraftKings estimates that the total addressable market for online sports betting and iGaming is over $40 billion in the United States. Management estimates that it should be able to claim as much as $4.9 billion of that revenue over the next few years.
DraftKings has a considerable edge over competitors. It already has more than 4 million users on its daily fantasy platform, wagering money on fantasy sports.
It will be an easy sale to move those customers into the sportsbook platform when the time comes in each state. It also has eight years of data that can be analyzed to figure out ways to acquire and retain customers.
DraftKings had a good year in 2020 despite the weirdness that was the world of sports. In the most recent quarter, the company reported revenue increases of 98% year over year. When you back out the revenue gains from acquisitions, DraftKings still saw a 42% increase in revenue from the core business.
DraftKings’ data-driven marketing strategy continued to pay off as it reported an increase in unique monthly payers of 64% to over 1 million.
DraftKings also introduced 2021 revenue guidance of $750 million to $850 million. That works out to be a 45% revenue increase in 2021.
DraftKings signed deals with the Chicago Cubs, Colorado Rockies, and New York Giants to be exclusive sportsbook partners. The Cubs deal includes a possible sportsbook located in Wrigley Field.
It also announced a multi-year agreement with ESPN to work together in various areas, including becoming a co-exclusive sportsbook link-out provider and exclusive daily fantasy sports link-out provider.
DraftKings is going to be an enormous player in the online sports betting industry here in the United States. It is already active in 10 states with 20% of the U.S. population, and it’s looking to expand as more states legalize sports betting.
This could be one of the great growth stock stories of the decade.
— Money Morning Staff
Source: Money Morning