- Worth the Gamble?
- Boyd Gaming Corporation (NYSE: BYD)
- Flutter Entertainment (LSE: FLTR) (OTC: PDYPY)
What’s the most money you’ve ever lost in one day?
A hundred bucks when you left in your wallet at a train station? A few thousand on a penny stock that went belly up overnight? A hundred thousand in your retirement account during the 2008 financial crisis?
That’s peanuts compared to what one New Yorker lost on Sunday night: Two point two million dollars!
That’s the amount of cash one single man lost on Sunday after placing a bold bet on the Philadelphia Eagles beating the Kansas City Chiefs. It was the single largest wager from Caesar’s Sportsbook.
He wasn’t alone, as 60% of bets came in for the Eagles to pull it out. I watched the game with a die-hard Eagles fan with a mere fifty bucks on the line, but between the cash and the pride, he was crawling up the walls in the fourth quarter before the Chiefs won it on a last-second field goal.
I can’t imagine the monster he would have transformed into if he had over a million on the line.
All told, over 50 million people bet more than $16 billion on the game – a new record. One hundred million sports bets came in, according to GeoComply, which is an increase of 25% over last year’s game. FanDuel said it was taking 50,000 bets per second at its peak.
And these aren’t your Grandpa’s sports bets, where you just pick your favorite team and throw a couple bucks at it. In today’s gambling environment, you can bet on pretty much everything. Prop bets – wagers on bizarre actions that aren’t even related to the game – have become extremely popular over the past few years.
Check out a few situations that people decided to throw their hard-earned money at:
- The coin toss. I suppose that would be the most reasonable of them. Unlike betting on black or red in roulette, you literally have a fifty/ fifty chance. Fun fact, five of the last six Super Bowl Coin tosses landed on heads, including this one. However, the four previous were all tails. It doesn’t seem like a fun bet to me.
- The color of Gatorade dumped on the winning coach. This is a fun one. At least you have to watch the whole game to find out if you cashed in. I’m sure you could do some research and figure out Patrick Mahomes' favorite flavor or if the Eagles typically fly with green. But here were the top three bets: Orange +250, Yellow/Green +350, or Clear/Water +500. The winner? PURPLE at +1600 odds! I smell a fix…
- The cheeseburger bet. Kansas City coach Andy Reid has never been shy about his love for cheeseburgers. The last time he won a Super Bowl, instead of saying, “I’m going to Disney World,” he responded, “I'm going to get the biggest cheeseburger you've ever seen … Might be a double.” Reid didn’t mention a burger this year, costing thousands of better their money.
This year could go on for a hundred pages. That’s how popular gambling is these days. It’s music to the ears of gambling and gaming companies.
Many of them are publicly traded and offer different takes on the industry. These “vice stocks” have very different profiles and approaches to taking your money. They say the house always wins.
But does it?
Worth The Gamble?
If you watched the Super Bowl, you would have seen a slew of big-money commercials for gambling companies like FanDuel, MGM, and DraftKings. Football games or not, you’re seeing more and more gambling exposure everywhere you look.
That’s because 36 states have legalized sports gambling, and 26 have done so for mobile gambling. Those numbers will keep growing along with the billions flowing into it. It’s estimated that close to ten states will start legalized gambling legislation this year. California, Florida, and Texas are currently the biggest holdouts.
It’s no longer “What Happens in Vegas, Stays in Vegas.” Gambling is ubiquitous around the country and, regardless of where you live, you can easily get yourself some action.
According to Forbes:
In the first ten months of 2022, Americans wagered $73 billion legally on sports, up 70% year-over-year, according to the American Gaming Association. Sports betting companies generated $5.77 billion off those wagers, up 78% year-over-year, and states and the federal government generated an estimated $1.3 billion.
But there is a difference between brick-and-mortar casino stocks and online gambling companies. While legacy casino companies like Caesar’s (NASDAQ: CZR), MGM (NYSE: MGM), and Las Vegas Sands (NYSE: LVS), and online bookies like DraftKings (NASDAQ: DKNG) and FanDuel (Flutter OTC: PDYPY).
Here’s how the big players in the space have performed over the last year:
You can see that only Flutter Entertainment is in the green. The rest have taken a haircut in the past year. That may give us an opportunity to buy low as both casinos and online betting open up in more and more states.
Let’s take a look at the two best investments in the gambling industry today.
Boyd Gaming Corporation (NYSE: BYD)
Boyd Gaming owns and operates casinos and hotels in the United States. The company was founded in 1975 by Sam Boyd and is headquartered in Las Vegas, Nevada.
Boyd Gaming operates 29 properties in ten states, including Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. Some of its most well-known properties include the Borgata Hotel Casino & Spa in Atlantic City, New Jersey, and the Orleans Hotel and Casino in Las Vegas, Nevada.
Its $6.9 billion market cap is far smaller than companies like Las Vegas Sands ($43 billion) and MGM ($17 billion). That not only makes it a lesser-known company but could also be an interesting acquisition target for one of the other big players.
From asset management group Baron Funds:
Boyd’s Business conditions have been strong, yet the shares are valued at only six times 2022 estimated cash flow versus a long-term average of more than 9 times cash flow. The company maintains a strong and liquid balance sheet. Insiders own approximately 27% of the company. We believe Boyd is a compelling acquisition target.
Another independent research firm, Susquehanna, just increased its target price to $72.
Boyd currently trades at ~$65 and offers a 1% dividend, while the other casino companies all halted theirs during the pandemic. They just increased that dividend this week and are expected to continue to do so.
Over the last few months, Boyd’s has shown some momentum, as you can see here:
The company fundamentals are strong and should be strengthened further by the recent acquisition of Pala Interactive. Pala is a gaming software and services supplier that provides real money and social gaming solutions on both a business-to-business and business-to-consumer basis across the US and Canada.
Boyd now has control of the player account management system, casino, poker, and social casino and poker platforms.
Keith Smith, CEO of Boyd Gaming, said: “Online casino gaming is an attractive growth opportunity for our company, and the acquisition of Pala Interactive provides us with the technology, products, and expertise to create a profitable regional online casino business.”
Boyd also has a 5% stake in FanDuel, the largest online sports betting brand in the United States.
I think Boyd is an underrated casino stock that has been less volatile than its peers and should only grow along with the industry.
Flutter Entertainment (LSE: FLTR) (OTC: PDYPY)
Flutter is a sports betting and gaming company that operates in the US, the UK, Ireland, and Australia.
They own FanDuel, which, as mentioned above, is the global leader in online sports betting. FanDuel brings in $3 billion in annual revenue, making up the largest segment of Flutter’s overall business. The company also owns Paddy Power and Betfair, well-known international gambling platforms.
Here’s why I’m most bullish on Flutter. They currently only trade on the London Stock exchange and the over-the-counter market, as shown by the tickers above. That may be about to change.
Following the huge Super Bowl boost this week, Flutter announced that the board is speaking with shareholders about uplisting to the NYSE in a new IPO. That would bring a lot more attention and institutional and retail stock purchases and be a massive boost to Flutter’s share price.
“FanDuel would be the Apple of our industry,” Jeffrey Kamys, chief investment strategist for the iBet ETF. “It would be our top holding if they went public.”
Jefferies analysts said it would command a premium “as market leader in the larger global online gambling market.
I would be looking at shares now for the eventual reality of a US listing and IPO boost.
As I mentioned above, it is the only gambling company I’ve covered that has actually grown its share price over the past year:
If the IPO goes through, which needs a 75% shareholder vote and I believe is incredibly likely, there will be a windfall not only for Flutter investors but the entire online betting sector.
Considering that the global online gambling market is expected to explode from $63.53
The Profit Sector
Leave a Reply