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3 Gambling Stocks Poised for a Bull Run

By Rick Munarriz - Mar 22, 2021 at 10:05AM

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If you're going to bet on the betting industry, these three off-the-beaten-path winners grew their revenue by at least 95% in their latest quarter.

When it comes to gambling, the old adage is that the house always wins. The thrill of the life-altering score keeps the wages coming, but at the end of the day the operator of the casino or the betting platform will come out ahead. 

DraftKings (DKNG 3.37%), Skillz (SKLZ 6.59%), and fuboTV (FUBO 9.35%) are three of my favorite gambling stocks. I own two of them already, and I keep warming up to the third as a future portfolio addition. They're not the traditional names one thinks of when it comes to gambling, but they are growing a lot faster than many of the obvious plays. Let's see why I think these are three stocks that you can bet on right now.

A woman fanning 20-dollar bills in front of a sign welcoming visitors to Las Vegas.

Image source: Getty Images.

1. DraftKings

If you're a sports fan it's hard to avoid the marketing missives of DraftKings. The fantasy sports platform has struck deals with leagues, sports broadcasting networks, and even individual teams to boost its exposure. It's working. The number of monthly unique players on DraftKings has climbed 44% to 1.5 million over the past year. Average revenue per user has soared 55% in that time, and that brings us to the monster growth that DraftKings is bringing to the table. 

Reported revenue soared 146% in its latest blowout quarter, up a still-impressive 98% on a pro forma basis. DraftKings is posting this growth with some leagues playing abridged seasons in 2020 and 2021. One can only imagine how good things will get as things return to normal with DraftKings being even more ubiquitous. 

A secret ingredient here is that DraftKings also owns an actual sportsbook business for more traditional wagering. States are easing up on their restrictions in an effort to drum up more tax revenue, and DraftKings has its foot in the door of sports fans already through its fantasy sports platform. 

2. Skillz

There's a fine line between video gaming and gambling, and that's where Skillz parks its business model. It operates a mobile gaming platform that runs tournaments with big paydays for the winners. In short, Skillz is a magnet for mobile gamers who are ready to bet on themselves. 

The appeal is obvious for all parties here. More than 20,000 mobile game developers have flocked to Skillz, and it's easy to see why. Skillz offers a tempting model for monetization beyond meager ad revenue and premium app downloads. The bar isn't necessarily high for publishers, as some of the more popular offerings on Skillz include billiards, bingo, dominoes, and even competitive solitaire. Gamers come because who isn't tempted by the $60 million in monthly prizes -- and rising -- that Skillz is dangling through the roughly 3.5 million daily tournaments it hosts? Monthly active users have risen from 2 million to 2.4 million over the past year, a modest increase, but the number of paying users in that group has more than doubled.

Skills wins, too, of course. Even after paying developers and prize winners it's still keeping a little more than 14% of the gross merchandise volume (GMV). Revenue shot 92% higher last year, including a 95% burst in its latest quarter. Guidance calls for top-line growth to decelerate to 59%, but we're talking about years of heady growth if Skillz plays its cards -- or dominoes -- right.  

3. fuboTV

Until three months ago, fuboTV was purely an ancillary gambling play. It operates a streaming TV service with a "sports-first" approach to programming, making it a reasonable digital viewing platform for sports gamblers. The upside on that front has changed with the December acquisition of a fantasy sports specialist and a January deal for an interactive gaming company that will help it launch a sportsbook before the end of this year. 

There are now 547,880 premium fuboTV subscribers, a 73% increase from where it was at the start of 2020. Revenue is climbing even higher -- up 98% in its latest quarter -- with rising ad revenue and monthly fees pushing average revenue per user higher. 

The rollout of fantasy sports features this summer and an actual online sportsbook in the fourth quarter should keep its subscribers close. The moves will also help fuboTV stand out from rival live TV services that don't have that optionality. 

DraftKings, Skillz, and fuboTV are worth considering for some high-tech gaming and gambling exposure. Take a closer look. I bet that you will probably agree. 

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Stocks Mentioned

DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$14.72 (3.37%) $0.48
fuboTV, Inc. Stock Quote
fuboTV, Inc.
FUBO
$3.51 (9.35%) $0.30
Skillz Inc. Stock Quote
Skillz Inc.
SKLZ
$1.94 (6.59%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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