5 Things You Should Know About Sports Betting Stocks This Year

Keeping sports betting stocks afloat during the pandemic, was the fact that sports bettors were willing to bet on anything, including a hot dog eating contest. Despite the shutdowns triggered by the coronavirus, sports betting companies kept the handle high with odd sporting competitions.

Sports Betting Stocks Survive the Shutdown

A December deal that seemed to hit a trifecta had investors concerned that it wouldn’t cross the finish line after the pandemic shutdown major league sports.

Last December, Diamond Eagle announced that it was entering into a $3.3 billion three-way combination deal with DraftKings, a daily fantasy sports website, and SBTech, a gambling technology company. Finally, the combined company was renamed DraftKings. The new company issued shares, which subsequently surged.

On March 12, DraftKings revealed its premerger first-quarter results, but the only news that investors saw was that March Madness, the most bet on sporting event in the US, had been canceled. Shares of sports betting stocks fell sharply, capping off a three-day, 34% slide.

The cancellation of college and major league sports prompted DraftKings to scramble, finding sporting events its clients could bet on. Exotic offerings such as ping pong matches in Belarus, Korean baseball, and Nathan’s hot dog eating contest produced a surprising level of enthusiasm.

The DraftKings deal closed despite the challenges, and a few months later, shareholders had quadrupled their money. Sports betting stocks, despite the odds, survived the pandemic.

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Sports Betting Stocks Riding High

Even after taking some recent profits, the combined market value of three online sports betting stocks, DraftKings, Penn National Gaming, and Flutter Entertainment, has risen from $6 billion in March to nearly $45 billion. Flutter Entertainment owns the popular online sportsbook FanDuel. That is more than the combined values of casino giants Wynn Resorts and Las Vegas Sands.

The Futures are in Sports Betting Stocks

The COVID-19 lockdowns proved that when stuck at home, sports bettors will bet on anything. The gambling urge has also influenced the equity market, as investors try picking stocks through retail brokers like Robinhood.

However, it’s probably a good time to step back and let your money ride. That’s not because sports may once again be canceled in the near term; it’s because it’s future sports seasons, that really matter.

The future of sports betting is propelled by a 2018 Supreme Court decision that opened up sports betting to all 50 states. In addition to the more than 40 states that allow daily fantasy sports, nine states have legalized sports betting. Moreover, three states have also legalized online casino gaming. And there’s more to come.

It’s Easy to Spend Money Gambling Online

A DraftKings member can use a single online wallet for sports betting, daily fantasy, and casino games, in a state like New Jersey. While DraftKings is mostly known as an online sportsbook, the company has been branching out into all aspects of online gambling.

DraftKings estimates that the total addressable U.S. market for online betting and gaming could be $40 billion annually. Flutter says online represents just 12% of the gambling market globally and is growing at 10% a year.

Flutter’s FanDuel and DraftKings are serious competitors, but they haven’t actually earned any money yet. While its a longshot, Flutter, and DraftKings have plenty of financial backing, with DraftKings sitting on $1.2 billion in cash. Likewise, Flutter is supported by very bankable international gambling divisions.

Now with their formidable name recognition, cross-selling and technological savvy has made them the top competitors in the lucrative online sports betting and gaming market. If investors think that these two sports betting stocks can remain on top, as more states open up to online gambling, then they should let their money ride.

While land-based US casino operators are looking for a bigger piece of the action, the future looks bright for online sports betting stocks.

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