In this article, we will take a look at the 17 best gambling stocks to buy now. To see more such companies, go directly to 5 Best Gambling Stocks To Buy Now.
With March Madness behind us, now is the time to take a look at the sports betting and gambling industry to gauge the real, organic growth catalysts for the industry with a long-term perspective.
Overall, the gambling industry is set to thrive, thanks to a rapid legalization of sports betting and an increasing trend of legal wagering among young population all over the world.
In February, casino gaming revenue in Macau, one of the hottest regions when it comes to gambling, jumped 33%, beating estimates. Analysts believe this was an encouraging sign that the recovery in the Macau gaming space was not temporary and remains in place two months after China lifted its COVID-19 restrictions. According to data released by Gaming Inspection and Coordination Bureau, gross gaming revenue touched $1.3 billion during February. However, the figure was down 59% from the pre-pandemic levels.
Growth Prospects of the Gambling Industry
The biggest long-term growth prospect for the gambling industry remains the huge interest young Americans are showing for online sports betting and gambling. Last year, commercial casinos and online sports betting apps raked in a whopping $60 billion in gambling revenues, crushing the record of $53 million revenue set in 2021, according to data from American Gaming Association.
Rapid legalization of gambling and sports betting is causing major casino companies like Caesars Entertainment, Inc. (NASDAQ:CZR), Las Vegas Sands Corp. (NYSE:LVS) and MGM Resorts International (NYSE:MGM) to race to open gaming centers in major cities of the country. For example, a Wall Street Journal report earlier this year reported how major real estate developers and casino operators are eyeing central locations in New York to open their entertainment centers. The report said that New Yorkers in the past had to leave the city limits and travel to places like Atlantic City or rural Connecticut for gambling. But not anymore.
The report quoted Michael Pollock, managing director of gambling research firm Spectrum Gaming Group, who thinks that New York is a promising market for gambling due to the its population’s disposable income, tourism and its “New York City” brand.
The report also cited data from Spectrum, which says that three downtown casinos in New York alone could rake in a whopping $4.4 billion in gross gambling revenue.
"From Bricks to Clicks"
The gambling industry has been going through a huge transition over the past few years. This transition is fueled by online gambling.
According to a comprehensive report from investment banking and financial services firm Houlihan Lokey, in 2021, the US online gambling market reached a whopping $10 billion. The report cited data from American Gaming Association, which estimated that illegal iGaming market in the U.S. was nearly three times the size of the legal U.S. iGaming market.
The report draws parallels between the online commerce and online gambling markets, as it believes the “consumer is comfortable transacting online.” While Houlihan Lokey believes the ecommerce market took decades to catch up and accounts for about 15% of the total retail sales, the online gambling market could “quickly become 20%–25% of the business sooner than expected.” The investment banking and financial services firm Houlihan Lokey calls this transition “from bricks to clicks.”
Houlihan Lokey said the valuations in the digital gaming space were “overheated” in 2021 and early 2022, driven by easy monetary policies, the SPAC boom, rapid deployment of OSB and iGaming and an overall euphoria highlighted by meme stocks and NFTs. While it believes 2022 was one of the “ugliest years” for the related stocks, its belief in the digital transformation of the sector remains “unshaken.”
The report said 2023 will be the “reset” year for the industry. The firm sees a lot of consolidation in the online gambling space, driven by scarcity of capital, small companies’ getting forced to be acquired by major players to survive, the need to operate more diversified businesses to reduce risks, among other factors.
For this article, we scanned Insider Monkey’s database of 943 hedge funds and picked the top 17 gambling stocks with the highest number of hedge fund investors. We picked pure-play gambling companies, casino operators, online sports betting companies, tech companies providing services to casinos and online sports betting companies and entertainment companies that draw a major chunk of their revenue from gambling and sports betting. The list is ranked in ascending order of the number of hedge fund investors.
Nevada-based casino operator Full House Resorts, Inc. (NASDAQ:FLL) ranks 17th in our list of the best gambling stocks to buy according to hedge funds. A total of 13 hedge funds tracked by Insider Monkey entered the first quarter of 2023 with Full House Resorts, Inc. (NASDAQ:FLL) in their portfolios. Full House Resorts, Inc. (NASDAQ:FLL), however, recently fell after the company posted a weak Q4 report.
Full House Resorts, Inc. (NASDAQ:FLL) operates five casinos and its sixth casino is in progress in Cripple Creek, Colorado. Full House Resorts, Inc. (NASDAQ:FLL) is also investing in sports betting expansion.
Red Rock Resorts, Inc. (NASDAQ:RRR) operates several popular casinos in the US. It ranks 16th in our list of the best gambling stocks to invest in according to hedge funds. In February, Red Rock Resorts, Inc. (NASDAQ:RRR) posted its Q4 results, according to which its adjusted EPS in the quarter came in at $1.49, beating estimates by $0.87. Revenue in the quarter inched up 0.7% year over year to reach $425 million, beating estimates by $3.27 million.
A total of 15 hedge funds tracked by Insider Monkey had stakes in Red Rock Resorts, Inc. (NASDAQ:RRR).
Diamond Hill Capital made the following comment about Red Rock Resorts, Inc. (NASDAQ:RRR) in its Q4 2022 investor letter:
“On an individual holdings’ basis, top contributors to return in Q4 included Red Rock Resorts, Inc. (NASDAQ:RRR) and UFP Technologies. Shares of locals’ casino operator Red Rock Resorts rose in Q4 as the business proved more resilient than broadly expected amid the current inflation environment. The company’s Durango Station project — the initial construction phase of which is expected to be completed in 2023 — remains on schedule. We maintain our conviction in the company’s positioning relative to the ongoing growth and recovery of the Las Vegas economy.”
Gaming, betting, and interactive entertainment company Bally's Corporation (NYSE:BALY) is one of the best gambling stocks to invest in according to elite hedge funds tracked by Insider Monkey. A total of 16 hedge funds tracked by Insider Monkey had stakes in Bally's Corporation (NYSE:BALY) at the end of the fourth quarter of 2022.
Reno, Nevada-based casino operator Monarch Casino & Resort, Inc. (NASDAQ:MCRI) ranks 14th in our list of the best gambling stocks to buy now. In February, Monarch Casino & Resort, Inc. (NASDAQ:MCRI) declared a one-time cash dividend of $5.00 per share. This dividend was payable on March 15 to shareholders of record as of March 1.
As of the end of the last quarter of 2022, 17 hedge funds tracked by Insider Monkey had stakes in Monarch Casino & Resort, Inc. (NASDAQ:MCRI). The biggest hedge fund stakeholder of Monarch Casino & Resort, Inc. (NASDAQ:MCRI) was Clint Murray’s Lodge Hill Capital which had a $6.6 million stake in the company.
UK-based Genius Sports Limited (NYSE:GENI) offers iGaming, sports betting-focused technology services. Earlier this year, Massachusetts granted the company Genius Sports Limited (NYSE:GENI) a 12-month betting license from the Massachusetts Gaming Commission.
Recently, JMP Securities’ analyst Jordan Bender gave bullish comments on Genius Sports Limited (NYSE:GENI) with a $7 price target. The analyst believes the company has more upside based on the growth of the sports betting industry.
Here is what Alger Small Cap Focus Fund has to say about Genius Sports Limited in its Q4 2021 investor letter:
“Genius Sports provides online sportsbooks with data from sports leagues. We view it as a picks-and-shovels sports betting company, so it isn’t dependent on the success of an individual gambling operator. The global online sports betting (OSB) market is forecast to grow from approximately $31 billion in gross gaming revenue (GGR) in 2020 to approximately $65 billion in 2025, a compound annual growth rate of 16%, and we believe Genius is positioned to increase its market share. The company has a 40% to 50% market share of sports events currently and an ambitious target to reach a 5% take-rate on this global gaming market compared to its current take-rate of 1.75%. The take-rate is the portion of gross revenues generated by online gambling operators that Genius receives.
Formerly Scientific Games, Light & Wonder, Inc. (NASDAQ:LNW) is a Las Vegas-based company that sells gambling-related products and services. Out of the 943 hedge funds in Insider Monkey’s database, 20 hedge funds had stakes in Light & Wonder, Inc. (NASDAQ:LNW) as of the end of the fourth quarter of 2022. The biggest hedge fund stakeholder of Light & Wonder, Inc. (NASDAQ:LNW) was Debra Fine’s Fine Capital Partners with a $547 million stake.
In early March, Light & Wonder, Inc. (NASDAQ:LNW) posted its Q4 results. Revenue in the period increased by 17.6% on a YoY basis to reach $682 million, beating estimates by $27.16 million.
Las Vegas, Nevada-based Golden Entertainment, Inc. (NASDAQ:GDEN) operates casinos, taverns, and slot routes. Golden Entertainment, Inc. (NASDAQ:GDEN) recently jumped after the company announced selling its third-party Distributed Gaming operations in Nevada and Montana to J&J Ventures for $322.5 million.
CBRE Equity Research’s John DeCree said in a note to investors that the asset sale comes at a significant premium to Golden Entertainment, Inc. (NASDAQ:GDEN)’s long-term trading multiple of 7.3X. The analyst reaffirmed his Buy rating on Golden Entertainment, Inc. (NASDAQ:GDEN).
As of the end of the fourth quarter of 2022, 22 hedge funds had stakes in Golden Entertainment, Inc. (NASDAQ:GDEN).
Racing, online wagering, and entertainment company Churchill Downs Incorporated (NASDAQ:CHDN) ranks 10th in our list of the best gambling stocks to buy according to hedge funds.
Earlier this year, Churchill Downs Incorporated (NASDAQ:CHDN) entered into an agreement with bet365 to launch online sports betting and iGaming in Pennsylvania.
Recently, Truist’s analyst Barry Jonas started covering Churchill Downs Incorporated (NASDAQ:CHDN) with a Buy rating. The analyst noted Churchill Downs Incorporated (NASDAQ:CHDN)’s potential beyond just the horse racing business.
The analyst set a $300 price target for Churchill Downs Incorporated (NASDAQ:CHDN).
As of the end of the fourth quarter of 2022, 24 hedge funds tracked by Insider Monkey had stakes in PENN Entertainment, Inc. (NASDAQ:PENN). The biggest hedge fund stakeholder of PENN Entertainment, Inc. (NASDAQ:PENN) was Ken Griffin’s Citadel Investment Group which had a $41 million stake in the company.
In February, PENN Entertainment, Inc. (NASDAQ:PENN) posted results for the quarter ending December 31, 2022. GAAP EPS in the quarter came in at $0.13, missing estimates by $0.29. Revenue in the quarter inched up 0.9% YoY to reach $1.6 billion, beating estimates by $20 million.
Baron Focused Growth Fund made the following comment about PENN Entertainment, Inc. (NASDAQ:PENN) in its Q4 2022 investor letter:
“Shares of gaming company PENN Entertainment, Inc. (NASDAQ:PENN) declined 42.7% in 2022 and penalized performance by 110 bps. This was due to investor concerns about a potential recession. Thus far, the company has seen no material change to visitation or spending levels. PENN is generating strong cash flow, which it continues to use to invest in its digital growth opportunity, while using excess cash to buy back its stock. PENN is well positioned to weather a slowdown or recession, and we believe that if one does occur, the company would likely still generate revenue and EBITDA above pre-pandemic levels. We regard the $80 million of startup costs in 2022 from its digital business to be modest in relation to PENN’s over $1 billion of EBITDA casino earnings. The losses from its digital business represent customer acquisition costs incurred as additional states legalize online gambling. Since it is far less expensive to retain existing customers than to acquire new ones, we expect marketing costs to decline as PENN builds its customer base. PENN’s core bricks and mortar casino businesses remain strong. Its healthy regional casino business and strong balance sheet should enable it to continue to easily absorb its digital losses whether or not a recession should occur.”
International Game Technology PLC (NYSE:IGT) is a UK-based company that makes slot machines and other gambling technology and products. In February, International Game Technology PLC (NYSE:IGT) posted strong Q4 results that also beat consensus estimates. Adjusted EPS of International Game Technology PLC (NYSE:IGT) in the period came in at $0.40, beating estimates by $0.04. Revenue in the quarter increased by 4.8% on a YoY basis to reach $1.1 billion, beating estimates by $70 million.
At the end of the last quarter of 2022, 27 hedge funds tracked by Insider Monkey reported owning stakes in International Game Technology PLC (NYSE:IGT), up from 29 hedge funds in the previous quarter. The biggest stakeholder of International Game Technology PLC (NYSE:IGT) was Ken Griffin’s Citadel Investment Group which had a $57.3 million stake in the company.
IGT is one of the best gambling stocks to buy according to smart money, in addition to Caesars Entertainment, Inc. (NASDAQ:CZR), Las Vegas Sands Corp. (NYSE:LVS) and MGM Resorts International (NYSE:MGM). Palm Harbour Capital made the following comment about International Game Technology PLC (NYSE:IGT) in its Q4 2022 investor letter:
“The second largest contributor was International Game Technology PLC (NYSE:IGT) (+32.3% +141 bps), the Italian-American lottery and gaming machine technology provider, which we introduced in our first quarter 2020 letter. The Company posted a sales increase of 8% and profit contribution from all operating segments, primarily driven by global gaming. Although the margin was 2% lower versus the second quarter of 2022, it remained above the last 15 quarters average. Market concerns about the debt level should abate on improved operating performance and as the already announced disposals reduced leverage to 3.1x. It is worth noting that management hit their 2025 leverage target more than two years in advance, while returning $224 million to shareholders through mid-October 2022. Management confirmed the upper half of their fiscal year 2022 guidance which combined with an improved credit profile drove the share price higher. We still find the steady cashflows and low valuation very compelling.”
7. Melco Resorts & Entertainment Limited (NASDAQ:MLCO)
Number of Hedge Fund Holders: 27
Headquartered in Hong Kong, Melco Resorts & Entertainment Limited (NASDAQ:MLCO) operates integrated resorts with entertainment and casino gaming facilities in Asia and Europe. As of the end of the last quarter of 2022, 27 hedge funds tracked by Insider Monkey reported owning stakes in Melco Resorts & Entertainment Limited (NASDAQ:MLCO). The total worth of these stakes was $400 million.
In addition to MLCO, hedge funds also love Caesars Entertainment, Inc. (NASDAQ:CZR), Las Vegas Sands Corp. (NYSE:LVS) and MGM Resorts International (NYSE:MGM).
A total of 32 hedge funds tracked by Insider Monkey had stakes in Boston, Massachusetts-based sports betting company DraftKings Inc. (NASDAQ:DKNG). Earlier in March, Argus upped its price target for DraftKings Inc. (NASDAQ:DKNG) to Buy from Hold, as the firm believes DKNG can gain from market share gains, greater customer retention, and earnings growth in existing markets. Amid the popularity of sports betting and a favorable regulatory environment, Argus expects DraftKings Inc. (NASDAQ:DKNG)’s revenue to jump to $3.1 billion in 2023 from $323 million 2019
