Why You Should Avoid Online Gambling Stocks Like the Plague
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DraftKings and Rush Street Interactive went public with much fanfare. Online gambling stocks were popular in 2020 and 2021. But sports betting and iGaming have been harder to make money at than investors thought.
Online gambling is supposed to be a growth business, but it's not living up to that potential. DraftKings and Flutter have been growing, while Rush Street Interactive grew 19% in the first half of 2022. However, each of these three companies is reporting heavy losses as they grow. This is because they're spending money to build out their systems and on advertising to attract customers. MGM said it costs $250 to acquire a single customer and its EBITDA won't reach breakeven until 2023 at best.
Online gambling stocks are expensive. DraftKings is not included in the list. The cheapest stocks include MGM Resorts and Penn National. Both companies have a large presence in physical casinos and are investing heavily in online gambling. Online-only companies that need to generate profit now are at risk of diluting shareholders or going bankrupt.
Consumer spending is shifting. People are spending more on gambling in Las Vegas than ever. Online gaming that ballooned during the pandemic is showing signs of slowing.
MGM Resorts owns half of BetM MGM with Entain and is generating billions in cash flow from existing properties. Caesars Resort owns its own online gambling business along with casinos across the country.
