Online Gambling May Not Be the Best Bet

With very slow starts in the first states to legalize Web-based gambling, some industry players may be behind the wrong horse. In the gambling world, brick-and-mortar remains king.

Apr 7, 2014 at 10:49AM

The gaming world has been increasingly focused on Web-based gambling as a means for growth, especially in the relatively mature U.S. market. Major players such as Wynn Resorts (NASDAQ:WYNN) and Caesars Entertainment (NASDAQ:CZR) have invested big in the segment and made lucrative partnerships, all while fighting tooth and nail for favorable state regulations. With all of this effort in mind, is online gambling all it's cracked up to be? Some areas are showing more promise than others, but Nevada, the capital of U.S. gaming, has shown very mild interest in the platform since its introduction in the last few months. Are gaming companies betting on the wrong horse?

Better than bingo
In a recent monthly Nevada gaming report, gross winnings for online gambling (the first period it has been reported since the state legalized Web-based gaming) were second to last, beating only bingo. In New Jersey, Delaware, and Pennsylvania, where online gambling has been legal since late 2013, the data is similar. In February, New Jersey's growth actually slowed, sequentially.

Considering the multiyear hype surrounding the potential for online gaming, this is a somewhat surprising fact, though it is far from a trend at this point. Bloomberg reported that New Jersey's state treasurer had originally estimated first-year incremental revenue from online gambling at $1.2 billion. Since then, the estimate has gone drastically down to just $34 million.

The causes for the slow take to Web-based gambling vary -- from technical problems on the websites to an increasing demand for physical locations. Payments have also been an issue, as some federal laws make it difficult for major banks to accept gambling-related deposits. Using credit cards remains difficult, too.

Bad bet?
Caesars has been one of the earliest to the Web-based gaming trough. The company has partnered with tech firms and professional sports organizations, as well as lobbied state governments incessantly to establish itself as the leader in the space. While Wynn and Las Vegas Sands are sourcing the vast majority of growth from the cash-cow regions of Macau and other parts of Southeast Asia, Caesars has not been well represented.

The stock reflects it, too. Caesars has traded up 15% in two years. In the same time, Wynn and Las Vegas Sands have booked 70% and 33% gains, respectively.

Regardless, most of the major gaming players are affected by the lackluster start to online gaming. They have all lobbied the government, both federal and state, for years, and spent millions in the process. Investors in Wynn and Las Vegas Sands likely won't feel too much pain, considering the amazing growth coming out of Asia, but Caesars could be a different story.

The online gambling space is still a new one, and the trends could improve with better execution and faster rollout across the country. At the moment, though, brick-and-mortar gambling appears to be the better bet.

Six stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Michael Lewis has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers