CGR Issues Report on Best Bets for Sports Gambling Boom (DKNG, WNRS, PDYPF, GAMB, PENN, CZR, MGM)

–Americans have wagered over $100 billion since June 2018

–The total sports betting handle in 2021 was over $57 billion, a 165% increase over 2020.

–The number of people regularly betting on sports increased by 80% in 2021

–The best bets in the industry may surprise you

Gambling on sports is turning into big business, and this trend looks like it will continue.  According to a 2021 survey, people aged 44 or under bet far more than older demographics.   (31% of people aged between 35 and 44, 28% of people aged 21 to 34, 10% of people aged between 45 and 64, 5% of people 65 or older claim to be regular bettors).

The phrase “the house always wins” is probably why savvy investors are placing their bets on stocks profiting from the sports gambling boom.  

FanDuel, a subsidiary of Flutter Ent. (OTCMKTS: PDYPF) (40%) & DraftKings (Nasdaq: DKNG) (29%) make up over two-thirds of the market share, however, the companies’ shares have plunged in recent months.  While top-line revenue has grown at a staggering rate, the marketing costs associated with growing their businesses have caused less than stellar profit margins.  

For instance, DraftKings (Nasdaq: DKNG) spent $981.5 million on sales and marketing in 2021, equal to 98% growth year over year and 76% of total revenue. Altogether, DraftKings’ operating expenses increased 96% from a year ago, totaling $2.9 billion. The company ended the year with an adjusted loss of $676.1 million in earnings before interest, taxes, depreciation, and amortization (EBITDA), an almost twofold increase in its loss from 2020.

While this could result in significant long-term revenue growth, it is still a risky ‘bet’.  If investors have the risk tolerance for sports betting stocks, there are a few OTC companies in the space with business models that could create much higher margins than their more recognizable counterparts.

Winners, Inc. (OTCMKTS: WNRS) is a stock that could live up to its name for investors.  The company’s model is to drive investors to sports gaming sites through affiliate marketing.   So they will benefit from the boatload of money companies like DKNG and FanDuel are throwing at customer acquisition.

WNRS stock is particularly interesting because its CEO is one of the most recognizable and respected names in sports handicapping, Wayne Allyn Root; aka “King of Vegas”.

Mr. Root’s resume is impressive:

–At age 16 when the media dubbed him “The Betting Whizkid” and “the next Jimmy the Greek.”  

–Root has been profiled by the biggest media in the world, including CNBC, CNN, The Wall Street Journal, Fortune, Equities, Worth, Success, Financial Times and Robb Report. 

-Starred in a Gambling reality TV show on Spike TV (King of Vegas).

–In 2006, Wayne became the only Vegas oddsmaker or sports handicapper ever awarded a star on the Las Vegas Walk of Stars. 

Winners, Inc. (OTCMKTS: WNRS) is flourishing under his leadership and has hit several impressive milestones in the past few months:

-Partnership with bet365, one of the world’s largest sports betting brands and currently legal in New Jersey.

-Signed an agreement with blockchain-based online casino and sportsbook Titan Corp. d/b/a Spartan Casino.

–Adding 2 industry vets to management; former 888sport executive Todd Kobrin President and former Customer Acquisition Manager at Tabcorp, Andy Scott Chief Marketing Officer.

WNRS’s latest announcement could be a major revenue driver and is why investors will most likely start hearing a lot more about this company.  The company, which operates through its subsidiary VegasWinners has won Google approval to run campaigns in regulated sports betting markets. This will allow WNRS to substantially increase revenues in the fast-growing online gaming industry expected to reach $1 trillion in 2022.

This will help the company drive substantially more business to its partners, which is one revenue source; the company also sells expert picks on its VegasWinners site, which will certainly benefit from increased exposure.

WNRS stock seems like a ‘winner’.

Gambling.com Group Ltd. (NASDAQ: GAMB) has a similar business model as WNRS.  It is a performance marketing company and a leading provider of digital marketing services active exclusively in the online gambling industry.  The ~$8 per share stock has a consensus 1 year price target north of $13 dollars. 

Analysts clearly see real growth potential in this model, however, GAMB does not have a frontman with the kind of cache as WNRS’ Wayne Allyn Root which is a major differentiator in this space.  Because WNRS trades on the OTC market it does not yet have the analyst following of GAMB.  

If WNRS had analysts following it, it can be inferred from the GAMB price target that they might expect similar growth, if not more due to the company’s low float.

Other interesting options in the space include, Penn National Gaming, Inc. (NASDAQ: PENN) an American racetrack and events operator, which also holds a stake in the mega-popular Barstool sports brand; Caesars, Inc. (NASDAQ: CZR) a well-known gambling brand that has started to enter the mobile gaming space, however, judging by its recent marketing push could suffer some of the same margin issues FanDuel and DraftKings have, MGM (NYSE: MGM) is entering the space as well.

Key Takeaway

Sports betting is booming and investors certainly have several options for capitalizing on the industry’s growth.  However, household names are killing their margins with the marketing necessary to make themselves ‘household names.’ For now, investors may want to start researching companies who are providing the marketing services to these companies such as Winners, Inc. (OTCMKTS: WNRS).

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