When we entered 2021, it was the Roaring 20s for sports betting and iGaming stocks, as investors jumped in giddily and bought shares at 20 and 30 times revenues, forecast four and five years out.
We are now nearing the end of 2021. As everyone knows, sobriety has set in, and stocks such as DraftKings, Penn National and Flutter are down dramatically.
Even the technology providers, which can be likened to the old analogy of selling picks and shovels to miners, have sold off. Kambi and GAN are both down more than 40 percent year-to-date as of this writing, and around 60 percent from their peaks.
And as euphoric as many investors were during the height of the mania, many now seem grimly down on the group.
But the full picture is more mixed than the manic or depressive headlines suggest.
While there’s been a sell off, it’s been from all-time highs. Looked at year-to-date, stocks are doing better.
Fantini’s Sports Betting Index is down just under 2 percent for the year. And Fantini’s Interactive Index is actually up nicely, at around 15 percent. That about matches the Russell 2000 and Dow Industrials, though it’s a bit below Nasdaq and S&P, which are up over 20 percent. (Fantini indices can be found at fantiniresearch.com/indices-home-page).
The point is that iGaming stocks have been doing OK, though many heavily linked to sports betting have been beaten down. Examples are DraftKings, off more than 25 percent and repeatedly hitting new lows, and PointsBet, down nearly 30 percent.
But there are big winners, too.
Evolution is up around 75 percent for the year. Though not well known to many American investors because it doesn’t trade in the U.S., EVO isn’t an unknown story globally. The Stockholm-listed company has a market cap around $35 billion.
The company’s big selling point is that it dominates online live table games. Live table games comprise a large and growing segment of the large and growth digital gambling world, already contributing 30 percent of revenues.
Catena Media is another big winner, up around 120 percent for the year.
Catena is riding the wave of U.S. gaming expansion and, unlike the operators or even technology providers, it’s making money.
Catena is a marketing affiliate. It publishes websites and publications that build readership, then directs it to online casino and sportsbook operators for a fee or share of revenues that its readers generate as bettors.
The current intense competition to achieve market share is made for affiliates like Catena.
Though not well known to American investors, Catena is likely to become known soon. The company, which hired American gaming executive Michael Daly as CEO, is likely to list in the U.S. in the foreseeable future.
Another company of some interest may be Flutter, which is down around 25 percent this year. The U.K. sportsbook and iGaming operator owns 95 percent of FanDuel. If it spins off FanDuel into a U.S.-listed company at the valuation many think it could fetch, the smaller stake Flutter keeps could be worth more than the 95 percent it now owns.
Finally, it might be time to take a fresh look at Penn National and DraftKings, given the strengths of the franchises compared to how far their stocks have fallen.
