Sports betting has grown increasingly popular. While this industry has been around for decades, many states outlawed betting on sports, creating certain jurisdictions those looking to get in on the action would have to travel to.
However, with the legalization of online sports betting in certain locales, the game has changed. Various bans put forward by the U.S. Supreme Court have been lifted in some states, with the number now allowing online gaming growing.
According to data from the Sports Business Journal, the sports betting sector saw incredible growth over the past year, with the total amount wagered reaching $121 billion in bets. This was a 30% improvement from the previous year’s $93 billion.
Although the legalization of sports betting has swarmed in almost all states in the U.S., the sector is continuously expanding. Middlemen are now actively looking for new betters and have continued to broaden their betting strategies. This presents the best time to invest in sports betting stocks to buy for rapid growth.
DraftKings (DKNG)
Leading the sports betting herd is DraftKings (NASDAQ:DKNG), as the company currently holds almost 35% of the U.S. online sports betting market share. The company expanded more of its lotteries and online casinos, gaining strong earnings growth from robust branding, and the company’s reach into most states with legalized gambling.
The company also showed excellent Q1 2024 results, with revenue exceeding $1.1 billion and surpassing the market’s forecast of $60 million. DraftKings also expanded in North Carolina and Vermont to capitalize more on online betting sports. The expansion drove a 53% revenue increase and attracted over 3 million new users. Its focus on user engagement continues to drive the company’s competitive edge for digital sports betting.
The market expects the company to reach full profitability by 2025. Currently, the DKNG stock looks relatively attractive for growth investors, trading at 53 times its projected 2025 earnings per share.
Caesars Entertainment (CZR)
With its drastic and aggressive recent expansions, Caesars Entertainment (NASDAQ:CZR) is another sports betting stock to own. The company opened its doors for operations in Nebraska in May. Moreover, Ceasers updated its online casino app, offering mobile sports betting on the Eastern Band of Cherokee Indians Tribal Lands.
In its recent earnings reports, Caesars also exceeded market expectations, reaching $5 million in EBITDA despite net losses from March Madness and the Super Bowl. Currently, the company is focused on debt reduction, but it’s also a company with the ability to grow fast. So, for those who think the fundamentals are poised to turn around, this is a stock to consider.
The current outlook for CZR stock remains positive, supported by high occupancy rates and average daily rates in Las Vegas. Analysts are also bullish, with a consensus Strong Buy rating, indicating a substantial potential upside of approximately 87% moving forward.
Penn Entertainment (PENN)
Revenue declined across all core businesses in Q1, including the company’s Interactive segment, a previously strong area for Penn Entertainment (NASDAQ:PENN). Land-based gambling revenue dropped across the Northeast, South, West and Midwest segments due to severe U.S. weather impacting visitor numbers. Interactive, which includes ESPN Bet, also saw lower revenue due to unfavorable sporting event outcomes. Despite this, CEO Jay Snowden remains optimistic, expecting growth in 2024 through product enhancements and media integrations with ESPN.
Penn recently appointed Aaron LaBerge as its new chief technology officer, effective in July. LaBerge, formerly a president at Disney (NYSE:DIS), brings over 20 years of experience, including roles as CTO for Disney Entertainment and ESPN. He will oversee Penn’s technology strategy and lead product development efforts, crucial for achieving growth targets, particularly enhancing digital experiences and integrating with ESPN.
Despite the declines in Q1, Truist Securities upgraded Penn’s rating to Buy, confident in Penn’s ability to sustain operations with its Interactive division, even if ESPN Bet underperforms. This followed the analyst’s downgrade last August when Penn rebranded Barstool Sportsbook as ESPN Bet in a $1.5 billion deal.
I think Penn is well-positioned to capitalize on its early success. And while this is the most speculative pick of the bunch, for those looking for outsized exposure to the growth trends underpinning the sports betting space, PENN stock may paradoxically be the best pick right now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
