The online gambling industry is the 10th most popular industry in the US in 2022 and that’s saying something. This industry is small at around $11 billion, but it is growing fast and is up 45% year-over-year since the end of November. The industry is also expected to continue growing at a high double-digit CAGR over the next 5 years, driven by increasing legalization and deepening penetration of existing and new markets. However, the real takeaway is that this industry expects to see an increasing level of profitability as it grows due to scaling and less need for promotional activity. What this means for investors is an opportunity to get into the market leaders now, while their share prices are still at current lower prices.
Flutter Entertainment, global market leader
Flutter Entertainment (OTCMKTS: PDYPY) is the largest digital gambling company important to US investors. This UK based company has operations in North America (Fanduel), the UK, Australia and internationally where permitted and holds over 42% of the US market share. The company is an integrated operator, which means it provides platforms for gaming, both internal operations and B2B services.
The company’s platforms are end-to-end solutions for brands looking to add gaming to their offerings and span front- and back-house operations. The only downside to the stock is that US investors must buy the stock on OTC Markets. There are 7 analysts who rate the stock and they pegged it to a moderate buy with no price target. Flutter Entertainment itself predicts 5x growth for its Fanduel segment as the industry matures.
Draftkings, taking the market by storm
Draft Kings (NASDAQ: DKNG) is another integrated operator with its operations in North America. Draftkings is the second largest market share in the US and is slowly closing in on its larger competitor. This stock is listed on the NASDAQ Exchange, so there is a little less risk in that regard. As for the outlook, this business is growing at a high double speed and it is accelerating in 2022. The latest news is the launch of operations in Maryland which is expected to take place ahead of the Thanksgiving holiday. Piper Jaffrey analysts began coverage after the news with a rating of Outperform compared to the Moderate Buy consensus. Their target predicts at least 40% of profits from the $15 level and that is not the highest target out there. Some recently set targets add another 50% or more to Piper Jaffrey’s target and that follows an analyst reset that happened earlier this year.
MGM Resorts is betting on digital gaming
MGM Resorts (NYSE: MGM) has thrown its hat in the ring by opening its own online gaming platform, BetMGM. The platform is the third largest in the US by market share and together with its slightly larger rival Draftkings has a combined market share of 39%. This gaming platform is available in 14 jurisdictions, fewer than DKNG, but that number is growing. As it stands, BetMGM is approximately 10% of MGM Resorts’ net annual sales and a major driver of growth and margin for the company. Current plans are to expand operations to New York and Japan, which would drive double- to triple-digit growth in the segment.