When it comes to casinos and gambling, while you might envision a craps table surrounded by decadent players, online casinos are quite the opposite.
Older and younger generations can bet with cryptocurrencies and play their favorite Vegas-style games from home with a few clicks on their smartphone or other mobile devices. Hence, investors are seeing lucrative opportunities with online gambling, which we will explore.
Attractive Player Preferences (Post Covid)
Legal in most states, gambling was affected by online gaming and Covid restrictions. However, the industry rebounded as more people frequented brick-and-mortar casinos post-Covid.
Additionally, the American Gaming Association states that the gaming industry is seeing record revenue even with gamblers online enjoying slots, table games, and sports betting through the major online casinos.
The phenomenal growth is attributable to the 2018 ruling that legalized sports betting. Hence, casinos now have more ways to reach the public with diverse betting options.
Blockchains, Virtual Reality, and AI
Virtual reality (VR) is helping to attract both players and investors. The immersive experiences give players a realistic Vegas-like setting. It also provides excellent sound quality, gambling features, and gaming design.
More players can enjoy sports betting where they connect with other players at live venues online. They can stream global eSports events and even access live dealer games with other players.
With artificial intelligence to prevent fraud and enhance player ad campaigns, casino developers are attracting more players. They are also successful in free-to-play games that generate revenue from in-app purchases. Hence, demand and growth are significantly increasing with players worldwide.
Blockchains are helping to impact the growth of online casinos for US players as more players use them for their payment methods. With multiple casinos offering cryptocurrency payment methods, players can bet anonymously with fewer restrictions, instantly load money, and make withdrawals fee-free.
Online Gambling Estimates and Key Players
Mobile gambling is steadily increasing as advancements in the digital space continue to climb with online casino expansions.
Estimated at $53.7 billion in 2019 four years ago and $63.53 billion two years ago, overall estimates for all gambling activities were $458.93 billion by 2026.
When factoring in gaming stocks, a few key players in this sector dominate the Las Vegas area and Macau, China.
Major casino operators include:
- MGM Resorts: MGM ($16.2 billion market cap) has the most popular Strip properties (Luxor, MGM Grand, Mandalay Bay, CityCenter) and overseas MGM Macau.
- Las Vegas Sands: LVS ($47.23 billion) Asian operations in Macau (Four Seasons, Venetian, Sand, Parisian).
- Caesars Entertainment: CZR ($8.9 billion) has about 50 properties in the US, but half its cash is from Las Vegas (Ballys, Tropicana, Harrah’s, Caesars, Flamingo).
- DraftKings: DKNG ($9.42 billion) has online gambling, sports betting, and fantasy football.
- Wynn Resorts: WYNN ($12.69 billion) has Encore and Wynn locations in Las Vegas and Macau, with the most cash from its Macau locations. Wynn Interactive offers online gambling and digital sports betting.
- Penn Entertainment: PENN ($4.43 billion) has 40 casinos in 20 states and runs online betting and sports gambling. Their digital media and sports betting are through Barstool Sports and theScore.
- Melco Resorts: MLCO ($5.73 billion) has locations in the Philippines, Cyprus, and Macau (City of Dreams, Altira, Studio City).
Prices are after the market closed on 4/26/23.
Gambling Stocks and Volatility
In exploring online casinos and the stock market, investor experiences vary and are sometimes cyclical. For example, Las Vegas Sands stock in September of 2017, if held for five years, would have a -27% return with dividends. And yet, purchasing LVS a year prior, it could have sold in 2017 for 100% higher.
DraftKings is another example of timing, picks, and volatility, as the market can quickly wipe out years of consistent profits. With a 52-week low of $9.77, it debuted at $20 in 2020 but fell below that amount in 2022 after reaching $71.75 a share in 2021. Hence, some suggest ETFs might be safer bets in what some investors call a bear market.
Factors Investors Should Consider
Concerns include recession and pandemic threats and enticing online offers, which draw gamblers from physical locations. It concerns the shift in online shoppers and the massive shutdowns with retail brick-and-mortar stores, while casino players can maintain multi-channel sales.
Casinos fall into the consumer discretionary sector, impacted by market downturns. With brick-and-mortar locations, employers still have to staff the tables regardless of whether players are in-person or online. It causes a high fixed cost, but on the flip side, profits are outstanding when incidents like social distancing from Covid restrictions are lifted.
Ideally, investors should anticipate economic slowdowns. While they may not beat a mass exodus in selling shares, they can lessen investment write-downs. Since casino stocks rise and fall, while they rally initially during a recession, they will likely serve better as multi-year trades but not long-term.
How can you invest in gaming stocks?
Create a brokerage account online, set up a watchlist of the top gambling stocks, and start investing in them.
What are a few ways to invest in gambling stocks?
Explore racetracks with publicly traded options, ETFs that include sports gambling, and gaming companies with sports betting and sportsbook apps.
What makes gamblers enjoy online gaming more than in-person gambling?
Players like accessing hundreds of games with progressive jackpots and live dealer games. They also benefit from generous welcome offers and signup promotions worth thousands of dollars.
After social distancing restrictions ended, gamblers continued to enjoy perks casinos offered online, which shifted the demand from physical casino locations. With online gambling operators providing cash match bonuses, progressive slot machines, live dealer games, and sports betting online, players have many incentives for gambling online.
Near-instant payouts, multiple software providers, massive gaming selections, and generous signup and return player bonuses are helping the industry to thrive. Other factors that draw players (and make gambling a goldmine for investors) include free spin offers, AI campaigns, heightened security, and multiple cryptocurrency payment choices.