Is Buying Gambling Stocks a Safe Bet in 2020?
Many would argue that playing the stock market is akin to gambling because they can go up in an instant and down the next, and vice versa.
That’s why it’s ironic perhaps that one of the biggest questions on Wall Street these days is if buying gambling stocks will be a safe bet in 2020?
The legality of sports betting in the United States
Before we tackle this question, it’s important to understand that this increased interest in gambling stocks is as a direct result of recent changes made on a federal level to the legality of sports betting in the United States.
In a nutshell, the US Supreme Court’s May 2018 ruling in the case of Murphy v. National Collegiate Athletic Association (NCAA) effectively ended America’s century long federal ban on sports betting.
In other words it opened the way for states to decide for themselves whether or not to legalize and regulate sports betting within their borders.
Murphy vs. NCAA Ruling by the US Supreme Court
Up until the ruling Nevada was the only state in the union that offered legalised sports betting.
To say the Court’s ruling generated shockwaves throughout gambling circles in the US and beyond is an understatement. But at the same time it caused much excitement among stockbrokers with regards to gambling stock.
The reason is that up until now illegal sports betting has been the norm in the United States, with roughly $150 billion in illegal bets placed per year.
However, through the legalisation and regulation of sports betting the individual states can get their hands on some of those proceeds through taxation and licensing.
Consider New Jersey, which brought the Murphy vs. NCAA case. Not long after the ruling was handed down, the state threw open the betting doors and the results speak for themselves.
For instance, in October last year alone New Jersey processed over $250,000 in wagers – a 41% increase over the month prior – a figure that continues to grow every month.
Other Pro Sports Gambling US States
Not to be outdone by Nevada or New Jersey, a host of other American states have or are in the process of jumping aboard the sports gambling bandwagon. These include Rhode Island, Delaware, New Mexico, Mississippi, Pennsylvania and West Virginia.
The US Supreme Court ruling also opened the way for many existing US companies and operations to reap the rewards of legalized and regulated sports betting. These range from sports clubs and land-based casinos to gambling app designers and developers.
Even long-established IT and social media giants like Google, Twitter and Facebook are expected to jump aboard the ‘sports betting train’ as they have such vast databases of users, many of which are existing sports and/or sports betting fans.
Gambling Stocks to Watch in 2020
So now back to the question of what you can expect from gambling stocks in 2020.
In answer to this the following four listed companies seem to be poised to deliver some exemplary returns next year. As to the question is it better to buy smaller operators or big behemoths, we’ll leave that one up to you to decide.
MGM Resorts International (MGM) is the biggest land casino operators in the USA with annual revenues of $4 billion in Las Vegas alone. Since sports betting is more lucrative than casinos, it’s not surprising MGM is so eager to up its sports betting footprint.
In 2018 MGM racked up $114 million from sport betting on Vegas Strip – just over one third of the total. Now after the Supreme Court ruling, the more states that allow sports betting, the more markets will become available for MGM to ‘stick their oar into.’
This will be made easier by the fact betting fans in these states will be able to ‘bet on the go’ via MGM’s working online sports betting app, which is already a big hit in Nevada.
MGM’s stock’s earnings are expected to rise by more than 24% in 2020, so if you don’t already own MGM stock, get some.
The Madison Square Garden Company
The Madison Square Garden Company (MSG) is a huge player in the US live sports and entertainment arena – pun intended. It’s also the owner of two top professional sports teams – the New York Rangers (ice hockey) and the New York Knicks (basketball).
The ruling has opened the way for the Madison Square Garden Company (and its biggest sports rivals) to see its market share more than double in the coming year. In 2018 the company saw a noteworthy 28% increase in its overall performance.
International Game Technology (IGT)
International Game Technology PLC (IGT) is one of the longest-running multinational gambling firms that manufactures land-based slot machines as well as online games.
As successful as its casino business is, however, it’s the firm’s foray into sports betting in recent years that has most surprised the market. In 2017 alone IGT handled over $12 billion in sports bets. Hence it’s such a desirable gambling stock to own.
Because it has the experience and expertise to successfully implement sports betting infrastructures (for companies like MGM), its earnings are expected to increase by up to 150% by next year.
Bragg Gaming Group
Bragg Gaming Group (BRAG.V; BKDCF) has an international audience of over 30 million for Give Me Sport (GMS), its media concern.
That, coupled with its online game developer Oryx Gaming (which is expected to launch a new sports betting platform called Give Me Bet (GMB) in the near future), could give Bragg the world’s biggest sports betting customer base.
For instance, GSM has 26 million active users on its Facebook page alone, which will no doubt ramp up its value, especially considering that ESPN only has 19 million Facebook users in comparison and yet is worth just shy of $30 billion.
Online Sports Betting is the Future
It’s no secret how profitable online gambling (including sports betting) is, with some industry insiders estimating that the global industry could be worth as much as $90 billion by 2025. That’s why (top) gambling stocks will definitely be a safe bet in 2020.