When it comes to football and sports betting, the closest thing to a sure-thing over the past 20 years is that a Tom Brady-led team would play in the Super Bowl, with Brady appearing in a record 10 (50%) of them since 2002. What is not a sure-thing is whether Brady will win the Super Bowl this year, though at a 70% win rate in the big game, betting on him to win has proven to be successful.
But no matter who plays in the Super Bowl or who wins the Super Bowl, DraftKings (NASDAQ:DKNG) could be the ultimate winner. And those looking to put $200 down on a bet may want to consider the alternative of placing that money into a longer-term investment that could potentially net higher rewards.
A king of the draft
When thinking about Brady's career, dare I compare it to the rise of Amazon. It's well documented that Brady was a sixth round pick (No. 199 overall) in the 2000 NFL draft. Imagine placing a bet or buying shares -- if they existed -- 21 years ago on a sixth round pick to play in 10 Super Bowls, win seven of them, and be the MVP in five of them. Maybe the odds might have been 1 million to one?
Now imagine a marketplace for books being run out of a garage in Washington in 1994 becoming a $1.7 trillion market cap company with stock shares priced at over $3,500 each. In December of 1996, after a full year of business, Amazon revenue was at $15.7 million. 21 years later (2017) -- the same length of Brady's NFL career so far -- total revenue was at $177 billion.
Both are astonishing feats that deserve recognition. But inside the betting numbers for Brady tells a bit of a different story. When betting on a Brady-led team across his full career, bettors would enjoy the reward of 264 wins against only 69 losses (80% win rate). A $100 bet per game when betting against the spread (ATS) would have net the bettor $4,770 total to date. That's a total gain of 14% across 20 years -- his first game played was in 2001. For those not familiar with ATS, it represents the number of points a team is either favored by to win or, as an underdog, to lose.
If a bettor were to have placed a $100 bet on Brady's team to outright win the games -- no point spread involved -- the bettor would have netted $5,850 total across all games. The reason for the slightly higher, but not by much, gain is because when betting to win straight up, the number of wins is greater (Brady's 80% win rate), but the bet typically has lower payouts due to Brady's teams often being favored to win. On average, whether using a straight up bet method or ATS, a bettor who placed $100 per game on Brady for every game of his career would have netted a total gain of 15.5%.
In looking at the stats behind Brady, one might say he is the draft king, or at least the greatest surprise draft pick of all time. And as online betting expands its footprint globally, DraftKings is looking to take its place on the throne, and is making a strong argument to have a place in investors' portfolios.
DraftKings has been a public company since 2020, operating in eight different countries and across 15 U.S. and global markets; it offers an online sports betting platform through mobile and retail channels in which bettors can place bets on major U.S. and international sports events.
The company has grown into one of the largest vertically integrated operators in the country; offering mobile casino games, retail gambling facilities, and mobile sports betting. It also has plans for an online marketplace of digital collectibles.
In the second quarter of this year, the company reported revenue just shy of $300 million, representing a 22% surprise beat over the mid-point range of analysts' expectations, and a 320% increase over the same quarter last year. A driving force behind the results is the number of unique payers growing by 281%, with total revenue on a per payer basis seeing a rise of 26%.
Driven by the higher-revenue numbers, combined with an increase in state legislative actions to promote legalized online sports betting, the company has raised guidance for full-year 2021 revenue. The previous average of $1.1 billion to an upward revision of $1.25 billion marks a 14% increase.
Following the two announcements in the past eight days that it is launching an online sportsbook in Wyoming, and Arizona, the company's market now consists of 14 states in which it engages with consumers through a legalized Sportsbook, reaching over 40% of the nation's total population.
The bettor play
Before we get to the bettor play, I'd like to point out that I'm a lifelong Michigan fan, which is where Brady played his college football. So, for me it's not my normal inclination to suggest an alternative to betting on Brady.
Having said that, betting on Brady (and the Bucs) to win the Super Bowl this season pays out at +600 per DraftKings, which means a bet of $200 would pay out $1,200 -- a gain of 500%. Not bad for a one-time bet that can provide an excellent return in a very short amount of time. The downside is that the maximum gain is limited -- based on the example bet amount of $200 -- while the maximum loss is at the highest possible risk, losing it all; meaning if you lose the bet you end up with zero, and zero opportunity for future gains on that original $200.
Investing $200 in DraftKings at the current price, just above $63, would get you three shares of stock. One year ago the price was $37, which represents a gain of 70% in one year. Now, I'm not saying it will grow 70% every year, but then again no one has stepped up to say they predicted Brady would be picked No. 199 in the draft and then go on to win seven of 10 Super Bowls in 20 years.
So, if revenue continues to grow as the company continues to expand its footprint, imagine what that 70% one-year return could look like in 20 years, supported by an online gambling market projected to grow at a rate of 11.5% annually, to $127 billion, from 2020 to 2027.
It's draft day for investors, and no matter where you pick you can all select the same player, DraftKings. Even if DraftKings doesn't get the top spot on the throne of online gambling, one bet I'd be willing to make is that it's not worth zero on Feb. 14, 2022, the day after the Super Bowl.