Gambling is a hobby that has been around forever, and it does not seem to be going anywhere any time soon.
According to a Global Industry Analysts report published in the summer of 2021 titled Gambling – Global Market Trajectory & Analytics, the betting industry, as a whole, should pull in $876 billion by 2026.
If that does occur, it will mark a $125 billion rise from the 2020 figure. In other words, the entire sector should grow at an annual compound rate of 3.6% in the next four years, with the betting segment leading the way as the most rapidly developing wagering sphere on the planet.
Gambling Stocks as an Investment – The Numbers
There is no doubt that gambling companies are continuously growing, mainly due to regions around the globe taking an increasingly laxer regulatory approach to this pastime. They do so to boost their economies and for government entities to fill their coffers by raking in the substantial tax revenues this activity can provide. Thus, this industry’s established steady climb pattern is why many consider gambling stocks a safe investment.
Even in the face of the current global health crisis, sector entities have managed to recover far more quickly than expected, and the internet section has even flourished in this calamity-ridden time.
Projections are that it should swell by a rate of 11.4% in the next six years, almost tripling in size ($158 billion) from where it was three years ago.
Due to the events stemming from the global pandemic, online play has received a dramatic user boost.
It is noteworthy to point out that, the same as at physical floors, online slot games have always been a cash machine for online casinos, producing upwards of 70%-80% of internet gaming revenues.
What are Gambling Stocks and are they Cyclical?
Per the standard definition, a cyclical stock’s price is affected by systematic and macroeconomic changes, and it fluctuates accordingly. Most assets that fall under this qualification have a history of following general economic cycles, meaning their price rises when the overall economy does well, and their value shrinks during recessions.
They are the opposite of defensive stocks, and some of the more notable industries whose entities’ assets qualify as cyclical include airlines, car manufacturers, and hospitality chains.
Gambling stocks for sure meet the cyclical requirements. They may show a general expansion trend, but if one were to analyse their performance over several years, it would likely show multiple peaks and valleys.
For example, even though online sport wagering stocks have been doing well these past couple of years, top analysts now suggest that it is time for investors to lay off them for a while due to too much current competition in the betting/gaming industry.
More importantly, the profits are not where they need to be at the moment, making assets from brands like DraftKings, Flutter Entertainment, and Penn National Gaming not as attractive as they were a while ago.
What Affects the Price of Gambling Stocks?
Multiple things can affect the price of gambling stocks. The most impactful are regulatory changes.
Each region, state, or country has a licensing/overseeing body that monitors all gambling-related activity within its territory. Such an organization sets the rules that all operators offering sports betting and gaming services in its jurisdiction must follow.
Thus, if it changes these somewhat unfavourably for operators, for whatever reason, that may influence their bottom line. In February 2021, Britain’s regulator, the UK Gambling Commission, decided to bring forward new measures that make the internet slot experience less intense, attempting to do its part in curbing rising problem gambling rates in the United Kingdom.
However, that action only motivated British gamblers to explore non-UK-based gaming brands.
In the past, the brick-and-mortar section of the industry got affected by gas prices and room/board ones. Today, due to online casinos and retail sportsbooks being so widely available via the internet and betting and gambling apps, these do not have the same potency.
As a rule of thumb, the more disposable income the public has, the more they will spend on leisure activities such as traveling or gambling. Therefore, a healthy economy means healthy gambling stocks.
Gambling Stocks Worth Considering
Even though land-based casino stocks got devastated by the ongoing pandemic, some market insiders are speculating that this is the perfect time to roll the dice on these battered gaming assets.
Following news of a potential Chinese gambling-related crackdown, and health measures limiting floor traffic at brick-and-mortar locales, the online casino industry is again showing signs of life, with Wynn Resorts, Melco, and Las Vegas Sands proving to be somewhat safe bets.
Horse racing juggernaut, Churchill Downs, remains a decent publicly traded option, which as the owner of the Kentucky Derby, is a powerful icon in the racing sphere. Tech providers Kambi and GAN also seem to be worth considering.
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