The market is betting that the gambling industry will come back in a big way this year. Some of the best-performing gambling stocks in 2021 are regional casino operators like Boyd Gaming and Penn National Gaming because the odds are favorable that smaller markets like Illinois, Mississippi, and Pennsylvania will beat out big-name destination cities such as Las Vegas, Atlantic City, or even Macao. Sports-betting companies are also grabbing the headlines -- DraftKings has been a winning stock in 2021, with shares up more than 35% year to date at Tuesday morning's prices.
While it's unlikely those stocks will lose their preeminent positions as ways to invest in the post-pandemic reopening, some less obvious gambling stocks are also looking like winners this month.
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Flutter Entertainment
Perhaps better known as the owner of FanDuel, Flutter Entertainment (FLUT 0.50%) is the "one" of the one-two punch in sports betting in the U.S., with DraftKings being the "two."
Flutter is the leading sportsbook in the U.S., with a 40% share of the market, and it owns 20% of the $5.3 billion internet gambling market, giving it a combined 31% share. With total revenue of $896 million last year, Flutter brought in more on the top line than its top two competitors combined. FanDuel is now live online in 10 states, with the total addressable market expected to grow to $20 billion by 2025. There should be additional increases afterwards, as the state markets will have not reached maturity.
But Flutter Entertainment is more than just FanDuel; it also gives investors exposure to PokerStars, BetFair, FOX Bet, and TVG, an online horse and greyhound racing television network. It's also an international gambling powerhouse. Paddy and Sky Betting & Gaming give it a leading 27% share of the U.K. and Ireland markets, the Sportsbet platform in Australia has a 46% share of the online market, and Adjarabet is the leading gambling company in the country of Georgia.
So while DraftKings is rightly becoming a household name among investors, with Flutter's stock essentially flat in 2021, it might be the better bet for online gambling growth -- not just in the U.S., but around the world.
fuboTV
fuboTV (FUBO -0.72%) used to just be a live-streaming sports broadcaster, which in itself was an interesting play on the market, but in December it announced it was buying fantasy sports outfit Balto Sports as a way to expand into online sports betting. Sure, FanDuel and DraftKings own the market, but U.S. sports betting revenue is expected to hit $2.5 billion in 2021 and grow to $8 billion by 2025, meaning there will be a lot of room for other, smaller players to make their mark.
By melding its livestreaming sports TV together with the chance for viewers to bet on events while watching them, fuboTV can create a business that builds momentum over time -- one that provides it with stability, but also the energy to drive additional, sustainable growth. CEO David Gandler said, "We believe there are significant synergies between consumers who enjoy wagering and our subscribers who enjoy streaming live sports, creating a flywheel opportunity."
Recently, fuboTV entered into a partnership with Caesars Entertainment for its sportsbook to gain market access in Indiana and New Jersey, which -- pending regulatory approval -- is expected to launch in the fourth quarter of this year.
The fuboTV platform offers its 548,000 subscribers access to tens of thousands of live sporting events annually, viewed over a mix of more than 100 channels, including 42 of the top 50 Nielsen-ranked networks. Subscribers tripled in the fourth quarter of 2020, with almost 93,000 new net additions, and they streamed over 544 million hours of content, up 82% from 2019.
The transition from a sports live-streaming channel to one where viewers can also place bets could have this media stock running higher this year.
Scientific Games
An investment in Scientific Games (LNW -0.68%) is like an investment in the general stores that supplied the Gold Rush miners with their picks and shovels, meaning a reopening of the economy could get the casino industry soaring again and they will need to continue to update their gaming systems and platforms. Ready to sell them the tools they need is Scientific Games, a leading provider across the full spectrum of technology, content, and services.
The business was hurt by the COVID-19 pandemic shutting down casinos last year, but now that they're up and running again, albeit at limited but growing capacity, the outlook for 2021 is looking stronger.
Scientific Games is also one of those hidden players in online gaming and sports betting, and its OpenSports technology is what undergirds the sportsbooks of Flutter Entertainment's FanDuel and Paddy Power. The two companies recently extended their long-running partnership for another five years.
It also just announced a cross-licensing agreement with industry peer International Games Technology for cashless gaming. By joining forces, the two should accelerate adoption of the technology for the gambling industry, a potentially important development in a post-pandemic world.
While Scientific Games' stock has soared nearly 1,100% from the lows it hit a year ago, it's a good bet there's still more growth ahead.
