Digital advancements and the growing availability of better internet connectivity across the globe are contributing to the expansion of online casinos, bolstering the gambling sector.
While I think quality gambling stocks Boyd Gaming Corporation (BYD) and International Game Technology PLC (IGT) are well positioned to soar and are worth owning, DraftKings Inc. (DKNG) might be kept on watch for momentum.
The rise in championships and tournaments for popular video game franchises is one of the fundamental factors driving the expansion of the gaming market. In addition, the growing availability of better internet connectivity across the globe and the rising popularity of smartphones are increasing demand and supporting the expansion of the gaming industry.
The gaming market is poised to reach $492.50 billion by 2030, growing at a CAGR of 13.4% until 2030.
Moreover, gambling is highly sensitive and responsive to new technologies and innovations. The unprecedented growth of online gambling activities, such as online casinos and betting, has propelled players in the online gambling market to adopt new technologies to survive the competition. However, online gambling has attracted legal scrutiny since its rise in popularity.
The global online gambling market is expected to reach $213.58 billion, growing at a CAGR of 12.6% by 2028.
Stocks to Buy:
Boyd Gaming Corporation (BYD)
BYD operates as a multi-jurisdictional gaming company in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. It operates through three segments: Las Vegas Locals; Downtown Las Vegas; and Midwest & South.
BYD pays $0.77 annually as dividends. This translates to a yield of 0.89% at the current market price, compared to the four-year average dividend yield of 0.54%.
BYD’s trailing-12-month gross profit margin of 71.11% is 101.7% higher than the 35.25% industry average. Its trailing-12-month net income margin of 18.48% is 341.4% higher than the 4.19% industry average.
During the fiscal first quarter that ended March 31, 2023, BYD’s total revenues increased 12% year-over-year to $963.97 million. Its net income increased 22.6% year-over-year to $199.73 million, whereas its adjusted earnings per common share increased 22.1% year-over-year to $1.71.
BYD’s revenue is expected to increase 1.9% year-over-year to $911.44 million during the fiscal second quarter ended June 2023. Its EPS is expected to increase 11.2% year-over-year to $1.65 for the same quarter. Also, the company has surpassed revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 20.2% over the past six months and 29.8% over the past year to close the last trading session at $72.26. BYD is trading above its 50-day and 200-day moving averages of $68.13 and $62.43, indicating an uptrend.
BYD’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade in Quality and a B in Momentum and Sentiment. The stock is ranked first out of 27 stocks in the Entertainment - Casinos/Gambling industry.
Click here to see the additional POWR Ratings of BYD (Growth, Value, and Stability).
International Game Technology PLC (IGT)
IGT operates and provides gaming technology products and services in North America, Europe, the Middle East, Africa, Asia-Pacific, Latin America, and the Caribbean. It operates in three segments, Global Lottery; Global Gaming; and Digital & Betting.
On July 20, 2023, IGT announced that it had upgraded Poland's national lottery operator Totalizator Sportowy's iLottery platform and deployed all of its components to the cloud. This go-live marks the first time that IGT has launched a customer's comprehensive iLottery platform to the cloud, and Totalizator Sportowy is the first European lottery to have its end-to-end iLottery system on the cloud.
On June 29, IGT announced that its subsidiary, IGT Global Services Limited, had entered into a cross-licensing agreement with FDJ Gaming Solutions France, a subsidiary of FDJ Group known for providing B2B betting services, distribution services, and interactive services for the gaming industry.
Through this agreement, both companies will gain access to each other’s comprehensive range of eInstant games. This collaboration aims to maximize growth opportunities for their respective lottery customers.
IGT pays $0.80 annually as dividends. This translates to a yield of 2.42% at the current market price, compared to the four-year average dividend yield of 2.63%.
IGT’s trailing-12-month gross profit margin of 48.08% is 36.3% higher than the 35.25% industry average. Its trailing-12-month net income margin of 5.17% is 23.5% higher than the 4.19% industry average.
In the first quarter that ended on March 31, 2023, IGT’s total revenue increased marginally year-over-year to $1.06 billion, while its adjusted EBITDA rose 3.7% from the year-ago value to $449 million. During the same quarter, the company’s net income and EPS amounted to $67 million and $0.11, respectively.
The consensus EPS estimate of $0.47 for the third quarter (ending September 30, 2023) reflects a 9.1% increase year-over-year. The consensus revenue estimate for the current quarter is expected to be $1.04 billion. Moreover, the company surpassed the revenue and EPS estimates in three of the trailing four quarters.
Over the past year, the stock has gained 77% to close the last trading session at $33. IGT is currently trading above its 50-day moving average of $29.25 and 200-day moving average of $25.55, indicating an uptrend.
IGT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Momentum, and Quality. Within the same industry, it is ranked #2.
To access the additional POWR Ratings of IGT for Stability and Sentiment, click here.
Stock to Watch:
DraftKings Inc. (DKNG)
DKNG operates a digital sports entertainment and gaming company. It offers multi-channel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries.
During the fiscal first quarter that ended March 31, 2023, DKNG’s revenue increased 84.5% year-over-year to $769.65 billion. Also, its net loss attributable to common stockholders decreased 15.1% year-over-year to $397.15 million, and the adjusted loss per share decreased 45.1% year-over-year to $0.51.
Analysts expect revenue to be 742.83 million in the fiscal second quarter that ended June 30, 2023.
The stock has gained 24.6% over the past month to close the last trading session at $31.08. DKNG is currently trading above its 50-day moving average of $25.97 and 200-day moving average of $18.65, indicating an uptrend.
DKNG has a B grade in Momentum. It is ranked #25 in the same industry.
Beyond what is stated above, we’ve also rated DKNG for Growth, Sentiment, Value, Stability, and Quality. Get all DKNG ratings here.
What To Do Next?
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BYD shares were trading at $71.30 per share on Monday afternoon, down $0.96 (-1.33%). Year-to-date, BYD has gained 31.41%, versus a 19.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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