Sports Gambling Stocks Missing Out On Wall Street Rally in New York

Posted on: January 24, 2023, 12:58h. 

Last updated on: January 24, 2023, 12:58h.

The Dow Jones Industrial Average is back in the 33,000-34,000 range, and traders on Wall Street who deal in precious metals were expecting an especially exceptional Tuesday. But those who deal in publicly traded sports gambling companies were still wondering why many of their holdings remained well below their 2021 prices.

Take a look at what the top sports gambling stocks did Monday:

  • Flutter Entertainment, parent company of FanDuel, closed at $78.34, up significantly from its price of $45.17 on July 13, but still way short of its March 19, 2021 price of $117.75.
  • DraftKings closed at $14.56, continuing a relatively flat nine months, as the stock was at $14.03 on April 22, 2021. It was as high as $71.98 on March 19, 2021.
  • MGM Resorts closed at $39.90, up quite a bit from its price of $27.75 last June 17, but still far short of its five-year high of $50.37 on Nov. 5, 2021.
  • Caesars Entertainment Stock closed at $50.34, a nice bump from the $41.60 it cost on Dec. 30, but well short of the $119.49 it traded at on Oct. 1, 2021.
  • Penn National Gaming closed at $33.92, down 20% in the last year and even worse for those who chose to buy on Feb. 28, 2022, when the stock traded at $51.35.

As we close in on the five-year anniversary of The Professional and Amateur Sports Protection Act of 1992 (PASPA) being overturned by the US Supreme Court, we know sports gambling is a growth business. But we don’t know how many of the two dozen or so operators doing business in the United States are going to survive. In just the past couple of months, FuboTV and MaximBet have shuttered their US operations.

Are These Stocks Worth an Investment?

Large hedge funds and big banks shy away from sports gambling stocks and cannabis stocks because of the stigmas associated with them. That does not help investors who dabble in those sectors of the market. The United States has experienced a sports gambling boom since PASPA was overturned, but it is not yet legal in three of the largest states — California, Florida, and Texas — and has been slow to get greenlighted in Massachusetts.

The Massachusetts Gaming Authority is still reviewing six operators: Bally Bet, Betr, Betway, DraftKings, FanDuel and PointsBet, and BetMGM. Caesars, Barstool, and WynnBet have already been approved. Retail sports gambling is expected to go live at Wynn Boston on Jan. 31, and online sports gambling sometime in March. Gamblers in the western part of Massachusetts have crossed the border to New York to open accounts, and Connecticut also has been a destination drive to fans of the Red Sox, Celtics, Bruins, and Patriots.

Only Betr, cofounded by boxer and internet celebrity Jake Paul, received a ‘nay’ vote to approve their license. Betr’s application was still approved with a 4-1 vote.

Massachusetts bears watching because it is a historically liberal state that nonetheless legalized marijuana shops and is tiptoeing into the sports gambling universe, contemplating measures such as a ban on sports betting ads in stadiums. It is yet another example of every state adopting different rules with no national standard — a variance that reeks of instability when it comes to institutional investors like Warren Buffett.

Here’s the thing: Investing in stocks is a gamble, too.

It comes down to what is undervalued today (such as the Sacramento Kings in the NBA futures markets) by people whose opinions matter to the wealthy. Hedge funds that saw the war in Ukraine coming made a killing on Canadian fertilizer stocks, and someone somewhere out there has an edge on how American consumers are going to get their eggs for less than $5 a carton. Unless you shop in Manhattan, where they are priced as high as $9.99 a dozen.

Bottom line: Not all sports gambling stocks are the same. DraftKings is not invested in retail operations, whereas FanDuel has a brick and mortar component, much like MGM. PointsBet is Australian-owned and is trading at just $1.25 after being as high as $11.19 on Feb. 12, 2021. Caesars just opened racebooks (for horse racing) in Wyoming and Washington. It was already live in Kentucky, Florida, Ohio, Indiana, Oregon, Montana, North Dakota, Maryland and Massachusetts.

Gambling stocks are a bigger gamble than tech stocks, but not as volatile as NFTs or cryptocurrencies.

Why Does This Matter Today?

Well, more sportsbooks will eventually drop out of the market, as MaximBet and FuboTV did. But one company that is the subject of constant speculation is BetFanatics, a subsidiary of the sports apparel company Fanatics, owned by former Philadelphia 76ers and New Jersey Devils part-owner Michael Rubin.

Industry insiders say there are no immediate plans for the parent company to go public. But that has not stopped endless speculation that an IPO (initial public offering) is coming. Whether that happens in five months or five years, it will be a closely watched stock because of the volatility of its predecessors.

The traders on Wall Street are watching that one closely.

Just remember, the only completely safe gamble is a United States savings bond. That is why your grandparents bought you one when you were a baby.