Although it was carried on across the United States every single day of the year, sports betting was only legal in Nevada and Delaware. Finally, after years of efforts to change the rulings that kept it illegal, that prohibition came to an end in 2018. The U.S. Supreme Court ruled in the favor of individual states on a case involving the constitutionality defined by a 1992 law, the Professional and Amateur Sports Protection Act. That act prohibited states other than Nevada and Delaware from operating sports betting.
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Since that time, numerous states have passed laws that allow both sportsbook gambling in casinos and online sports betting. The action is soaring, and a new Goldman Sachs research report noted this about the proliferation of online sports betting following a global gaming conference:
Our presenters believe that 95% of states will pass legislation for online sports betting in the next 10 years. In the near-term, Georgia and Arizona were viewed as states getting the least attention, but that could pass this year. New York is expected to make progress within the week as stakeholders are largely aligned — consensus from the panel anticipating multiple skins per operator. Texas was more controversial, with one panelist believing the spread-out legislative sessions may impede a bill getting passed this session (pushing legalization to 2023 at the earliest) whereas another panelist still saw a path (albeit slim) forward given alignment of stakeholders. Texas would need a 2/3 vote in both chambers, similar to California, which is seen as unlikely to move forward given tribal opposition.
We screened our 24/7 Wall St. research database looking for the top companies that stand to benefit from this huge opportunity, and while some of their stocks have made big moves, given the staggering growth potential, more upside may lie ahead. It is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Caesars Entertainment
Shares of this well-known old-school gaming company offer solid upside. Caesars Entertainment Corp. (NASDAQ: CZR) provides casino-entertainment and hospitality services, primarily under the Harrah’s, Caesars, Horseshoe and Eldorado brand names.
Its facilities include gaming offerings, food and beverage outlets, hotel and convention space, and non-gaming entertainment options. Caesars Entertainment is one of the largest gaming companies in the world and currently owns or operates 50 casino properties in 13 states and in four other countries.
Also the largest casino company in the United States, Caesars Entertainment, recently bought a minority stake in fantasy sports platform, SuperDraft. Caesars has the option to increase its stake to 100% over time at predetermined levels. SuperDraft will join the Caesars online brands, which include World Series of Poker, Caesars Online Casino and William Hill, and it will become part of Caesars’ single wallet solution that allows members more options to play games both live and online.
Roth Capital has a Buy rating and its $134 price target is the highest on Wall Street. The consensus target is $102.83, and Caesars Entertainment stock closed Friday’s trading at $87.53 a share.
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DraftKings
This is a sector leader and the stock has backed up nicely, offering a great entry level. DraftKings Inc. (NASDAQ: DKNG) operates as a digital sports entertainment and gaming company. It provides users with daily sports, sports betting and iGaming opportunities. It also is involved in the design and development of sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products.
The company entered the market in April 2020 at a time when most companies were putting off their initial public offerings. The offering was not an IPO in the truest sense because DraftKings came public through a merger with a special purpose acquisition company called Diamond Eagle, but similar rules applied, a practice that has grown exponentially since then.
On the revenue side, average revenue per monthly unique payer was $65 in the last quarter. The company noted in late February that it had surpassed a million users in its third quarter. DraftKings also raised its revenue outlook for fiscal 2021 from a prior range of $750 million to $850 million to a new one of $900 million to $1 billion.
The Goldman Sachs Buy rating comes with a street-high $87 price target, which is well above the $72.71 consensus estimate. Friday’s last trade for DraftKings stock came in at $63.60.
Flutter Entertainment
While this is perhaps a lesser-known player to most investors, the brands it owns and runs are huge. Flutter Entertainment is the world’s largest bookmaker. It operates as a sports betting and gaming company in the United Kingdom, Ireland, Australia, the United States, and elsewhere.
Flutter Entertainment offers sportsbooks and exchange sports betting products, daily fantasy sports products, and pari-mutuel betting products. It also offers fixed odds games betting products; online games and casinos; peer-to-peer games, including online bingo and poker; and business-to-business services. The company provides sports betting and gaming services through websites under the Paddy Power, Betfair, Sportsbet, TVG, FanDuel and Adjarabet brand names.
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Back in December, the company drew one step closer to having complete ownership of fantasy sports and sports betting giant FanDuel after the sportsbook announced it was acquiring an additional 37% stake in the business, bringing its ownership position to 95%. Boyd Gaming owns the remaining 5% interest. Flutter is buying the position from FanDuel owner Fastball Holdings and will pay $2.1 billion in cash plus about 11.7 million in new Flutter stock. The acquisition will lift its ownership stake from 57.8%.
The $260 Jefferies price target accompanies a Buy rating. No consensus target was available. The over-the-counter shares closed on Friday at $229.33 apiece.
Penn National Gaming
This is an analysts’ favorite for online gaming and shares have backed up nicely after a massive run earlier this year. Penn National Gaming Inc. (NASDAQ: PENN) owns and manages gaming and racing properties, and it operates video gaming terminals with a focus on slot machine entertainment. It also offers live sports betting at its properties in Indiana, Iowa, Mississippi, Nevada, Pennsylvania and West Virginia, and it operates an online casino under the name of iCasino in Pennsylvania.
Last year, Penn National bought a 36% stake in Barstool Sports valued at $450 million, along with options to increase its stake to 50% in the future. Barstool is a sports media empire that claims 66 million monthly active users, roughly 100 million social media followers and two of the top 30 podcasts in the country.
With a huge growth potential and a big drop in the share price, this is an incredible play for aggressive growth investors.
Goldman Sachs has a Buy rating and a massive $153 price handle on Penn National Gaming stock. That compares with a $108.85 consensus target and Friday’s closing share price of $106.58.
The massive potential for the total addressable market is more than enough reason for investors with a solid risk appetite to add any or all of these stocks to portfolios. They have all had big runs over the past six months but have all backed up nicely and are offering the best entry points since late last year.
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