- The online gambling industry is the 10th fastest growing in 2022
- Industry leaders hold over 80% market share
- Growth will be accompanied by improved profitability and rising stock prices
The online gambling industry is the 10th hottest industry in the United States in 2022 and that’s saying a lot. This industry is small with a value of around $11 billion, but it is growing rapidly and grew by 45% on an annual basis as of the end of November. The industry is also expected to continue growing at a high double-digit CAGR for at least the next 5 years, driven by expanding legalization and deepening penetration of existing and new markets. The real takeaway, however, is that this industry expects to see an increasing level of profitability as it grows due to leverage of scale and less need for promotional activities. What this means for investors is a chance to get into industry leaders now, while their stock prices are still at today’s lows.
Flutter Entertainment, the global market leader
Flutter Entertainment (LON:) is the largest digital game company that matters to US investors. This UK-based company operates in North America (Fanduel), the UK, Australia and internationally, where licensed, and has over 42% market share in the United States. United. The company is an integrated operator, which means that it provides gaming platforms for both internal operations and B2B services.
The company’s platforms are end-to-end solutions for brands looking to add games to their offerings and include front-end and back-house operations. The only downside to the stock is that US investors have to buy the stock on OTC markets. There are 7 analysts who rate the stock and they pegged it to Moderate Buy with no price target. Flutter Entertainment itself predicts 5X growth for its Fanduel segment as the industry matures.
Draftkings, taking the market by storm
DraftKings (NASDAQ:) is another integrated operator with operations centered in North America. Draftkings is the 2nd largest market share in the US and is slowly growing over its biggest competitor. This stock is listed on the stock exchange, so there is a bit less risk in that regard. As for the outlook, this company is growing at a high double rate and it has accelerated in 2022. The latest news is the launch of operations in Maryland which is expected to take place before the Thanksgiving holiday. Piper Jaffrey analysts issued coverage following the news with an outperform rating against the Moderate Buy consensus. Their target calls for at least 40% upside from the $15 level and this is not the highest target. Some recently set targets add another 50% or more to Piper Jaffrey’s target and this follows an analyst reset that occurred earlier in the year.
MGM Resorts bets on digital gaming
MGM Resorts (NYSE:) threw its hat in the ring by opening its own online gaming platform, BetMGM. The platform is 3rd in terms of market share in the United States and holds a combined 39% alongside slightly larger rival Draftkings. This gaming platform is available in 14 jurisdictions, fewer than DKNG, but that number is growing. As it stands, BetMGM represents approximately 10% of MGM Resorts annual net revenue and a significant driver of growth and margin for the business. Current plans are to expand operations in New York and Japan, which would drive segment growth in the double to triple digits.