As more states legalizing sports betting, and revenge travel heats up, the tourism scene in various gambling locales should improve. From “Sin City” to online gambling stocks, there are plenty of options for growth investors looking to get in on the action, by betting on the house.
One of the most prominent trends underpinning the recent gambling boom is the surge in sports betting mania. As of March 2023, 33 states have legalized sports betting. Additionally, around 68 million Americans, or 20% of the U.S. population, said they would wager on March Madness. That’s up from 50 million in February for the Superbowl.
The online gambling industry alone is expected to grow at a 12% compounded annual growth rate (CAGR) through 2030. I believe even higher growth is possible, considering the number of Millennials and Gen Z individuals feeding this gambling trend.
With that in mind, these three gambling stocks are well-positioned to make the most out of these strong secular tailwinds.
| DKNG | DraftKings | $18.16 |
| MGM | MGM Resorts International | $42.98 |
| PENN | PENN Entertainment | $28.93 |
DraftKings (DKNG)
DraftKings (NASDAQ: DKNG) stock has been hot this year, delivering nearly 70% growth year-to-date, as sports betting trends accelerate. Despite these tailwinds, and the stock’s recent surge, DKNG stock still changes hands 74% below its peak.
DraftKings trades for around $18 per share right now. That said, I think with significant upside potential remains with this name. That’s because the company has been expanding its offerings beyond sports betting, to include online casino games and other forms of online gambling. This diversification could help DraftKings capture more significant market share in the online gambling space.
According to Yahoo Finance, analysts are bullish on DKNG stock, with an average rating of buy and a 12-month stock price forecast of $24.14. This implies upside potential of roughly 35% from current levels. The company’s financials also appear to be strong, with revenue growing 80% year-over-year to $2.2 billion in 2022.
DraftKings is not yet profitable, but its net losses have narrowed quarter-over-quarter. These numbers should continue to improve in the fourth quarter of this year. Accordingly, the company’s strong growth profile is what I think deserves more attention, making DraftKings an unprofitable gambling stock worth buying now.
MGM Resorts International (MGM)
MGM Resorts International (NYSE:MGM) is another top gabling stock which has been propelled by the impressive gambling craze in this post-Covid world. With key operations in both Las Vegas and China, MGM is known for its luxury resorts and casino operations in the world’s biggest gambling centers. Macau and Las Vegas are two of the world’s top gambling capitals, both of which were hit hard by pandemic-related closures. However, MGM will be a standout winner among gambling stocks as both cities roar back.
MGM stock has gained 31.5% year-to-date, with quickly-improving financials. Its Q4 earnings beat analyst expectations, with revenue of $3.59 billion representing year-over-year growth of 17.4%. Additionally, the company’s income came in at $284 million, meaning MGM stock trades at a bargain price-earnings ratio of only 12.9-times. Of course, more factors determine the stock’s valuation. MGM has substantial debt, and is expected to see reduced profits in the coming quarters. However, all things considered, the stock still deserves a much higher valuation.
Analysts have an average price target of $55.7 for the stock, implying 27.3% upside.
PENN Entertainment (PENN)
PENN Entertainment (NASDAQ:PENN) is an outlier in this list of top gambling stocks to buy. This year, PENN stock has been trading sideways, down 1% on a year-to-date basis. That’s much worse than the broader market. However, I believe there’s nothing wrong about the company or its fundamentals, or at least not enough to cause it to trade at these levels. Instead, the risk of a recession drives investors away from the company.
Of course, the risk of a recession is much lower than a few months before. As markets remain robust, and the Federal Reserve is set to pause its incredibly-fast rate hiking program, companies like PENN Entertainment should benefit. Other factors, such as a robust labor market, also point to the idea that the U.S. economy is more resilient than ever. Thus, as more investors buy into the growthier areas of the market, PENN stock could be poised to deliver much-improved results in the quarters ahead.
PENN stock’s average analyst price target is $41.2, implying 42.1% upside. A number of analysts believe this stock could go as high as $55 over the next 12 months.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.