Online gambling stocks were some of the leading and newest growth stocks on the market in the 2H20. The bliss or elation that drove those profits is rapidly being uncoiled this year, relatively because expectations might have gotten overboard for online gambling as well as the sell-off in stocks.
The phrase what goes up must come down is entirely relevant to the situation. Steep percentage drops have hit Golden Nugget, Rush Street, GAN, DraftKings, and Penn National Gaming, especially with the pandemic closing down gambling establishments all over the world.
So, why are online gambling stocks plummeting off a hill? Is it time to buy online gambling stocks?
Reopening Of Casinos
In 2020, one of the reasons why online gambling stocks did so well was partly because land-based gaming establishments were shut down and closed. Gamblers wanting to test their luck needed to do it online and profits skyrocketed as a result.
Although a revenue decline in online gambling is not seen yet, we are beginning to see strong signs that most casinos will reopen. According to Caesars Entertainment, weekends are normally sold out.
What’s more, they’re predicting a massive rebound in earnings in the second half of the year. An increase in spending at casinos could mean less spending online, especially if there is hardly any money to be spent and limited free entertainment.
With that in mind, the reopening of casinos is one of the significant reasons why online gambling stocks are falling off a cliff recently.
Online Gambling May Not Be Favorable In The Long Run
Investors are gradually seeing that online gambling establishments won’t be profitable in the coming years. One reason is that it is costly to connect new consumers. As a result, billions of dollars are being spent on marketing and sales.
Another thing, it’s unclear when these online gambling companies will publicize net income. Let us take the publicly traded company in the United States called DraftKings for instance. According to the DKNG REVENUE (QUARTERLY) DATA BY YCHARTS, the company’s profit is quickly growing; however, administrative, general, and sales expenses surpass the earnings and losses are expediting.
The good news is that the situation could retrogress as the company gets bigger and customer procurement costs decline. Here’s the catch: it could take a few years from now for this to happen. What’s more, with high-reaching estimates, investors might be fed up that these companies might be profitable on the long runway.
4 Potential Online Gambling Stocks Worth Investing
Even with the significant declines in online gambling stocks, they remain some of the famous investment themes this year. Although the pandemic has made a new demand for this industry, each company has something great to offer.
In addition, with the legalization of gambling across the U.S., the online gambling market is undeniably huge, safe online casinos in the market usually launch in the winter season, when user activity spikes up. The following are the potential four candidates you’d like to invest in right now:
- DraftKings. DraftKings is a pure-play on online gambling and sports betting growth in the U.S. Its online gambling stock has had an excellent start in 2021 as the market remains at the front line of the pandemic. This growth stock held steady due to strong quarterly reports, analyst upgrades, and a recent partnership with the National Football League.
- Scientific Games. Gambling stocks are extremely volatile and high-risk. Even so, Scientific Games stock rose above other stocks. Years ago, SGMS gained a lot of debt in procuring slot manufacturers Bally Technologies and WMS Industries. The company is still covering those borrowings. Even after these debts, SGMS could deliver on its potential.
- Penn National Gaming. Like DraftKings, this company had a great start in 2021. Penn National Gaming operates forty-one facilities across nineteen states, boasting the most diversified and largest regional gaming footprint in the nation. The company’s stock has been a popular choice among investors due to its expansion in online gambling offerings.
- GAN Limited. This company is a platform for sports betting and online casino applications. Experts predict that this year’s profit of the company will be between 100 million and 105 million dollars.
If online gambling stocks continue to decline, we could see companies scrape online gambling assets to fasten onto their operations. Las Vegas Sands has stated their interest in acquiring online gambling stocks if stock prices continue to fall. For some people, until online companies prove they are profitable in the long run, they might have a difficult time gambling on the industry.