Traditional retail gambling is rapidly getting upended by the widening acceptance of digital technology, fueling the growth of iGaming and related online gambling stocks.
Pandemic restrictions on brick-and-mortar operations in the past year have simultaneously acted as a change catalyst.
Online casino gambling and mobile sports betting have exploded into the mainstream, moving from new niche entertainment to a mainstay in Pennsylvania and the other states where both are legal, including Delaware, Michigan, New Jersey, and West Virginia.
Penn National, DraftKings, and Rush Street Betting Stocks
The companies which have fueled online growth – and their stock prices – are a strong measure of the mushrooming interest by consumers and investors.
Meanwhile, esports is still not mainstream, though it’s gaining ground with a projected $207 billion market by 2027. But due to restrictive laws for now, that growth will not happen in the Keystone State. Neighboring New Jersey, where our sister site PlayNJ reports, is poised to get in on esports action.
Penn National stock drifting
Penn ($PENN), the only PA-based betting company, has recently made several moves, but the stock price hasn’t followed suit.
Back in early June, marketing executive Vimla Black-Gupta joined the board as the ninth director to fit NASDAQ guidelines as an independent member. She had marketing roles with Gillette, Procter & Gamble, and Estee Lauder.
The market yawned, and stocks drifted lower much of the month. The company was added to the S&P 500 in late March.
On June 24, the company announced it would make a private bond offering of $400 million for “general corporate purposes” (which closed on July 1). On an up day for the market, Penn traded lower.
Again, the market was apathetic.
As Yahoo Finance pointed out the next day:
“Penn National Gaming (PENN) closed the most recent trading day at $76.09, moving -0.54% from the previous trading session. This change lagged the S&P 500’s 0.33% gain on the day.
“Coming into today, shares of the casino operator had lost 8.12% in the past month. In that same time, the Consumer Discretionary sector gained 1.42%, while the S&P 500 gained 1.74%.”
At the close of July 7, Penn stock was trading at $71.19.
Penn had a huge stock run-up
Like other gaming stocks, Penn had a huge lift earlier in the year.
The stock hit $142. At about the same time, two of its leaders, including Jay Snowden and Peter Carlino, each sold giant chunks of the stock. Snowden sold more than $10 million in shares and Carlino more than $300 million.
The stock has had a long slide since.
For the PA company, much of that peak price in Q1 was based on the rollouts of its Barstool Sports-branded retail and digital sports betting operations. Even their strong Q1 earnings report did not make a difference in the value of the stock.
And despite positive projections for Penn’s early August Q2 report, there was no stock uptick. Share prices have instead dropped slightly.
For more on the history of Penn National, see our three-part series on the rise of the Wyomissing, PA-based gambling company.
- The early years from 1969 to 2005
- Middle years of growth from 2006 to 2018
- A company refocus to online gambling from 2019 to the present
DraftKings stock drifts back down to earth, then takes a blow
DraftKings ($DKNG) has likewise seen a share price drop in much the same fashion as Penn. Shares peaked in March at above $71 a share.
As we reported back in early May, DraftKings announced a strong Q1 a day later than Penn. But rather than boost shares, $DKNG took a $15 dip to around $41 on May 13 before gaining some ground back.
Two pieces of recent news, one positive, the other negative, have hit the company and affected stock prices recently.
First, the bad: Hindenburg Research dropped a damning report on June 15, most based on DK’s merger with Bulgarian-based SBTech.
Then the Hindenburg crashed the party
Key points from Hindenburg, which specializes in taking short positions, include:
- Unbeknownst to investors, DraftKings’ merger with SBTech also exposes extensive dealings in black-market gaming, money laundering, and organized crime.
- SBTech has a long and ongoing record of operating in black markets.
- Roughly 50% of SBTech’s revenue continues to come from markets where gambling is banned.
- SBTech formed a new distributor entity called BTi/CoreTech, staffed with 50 former SBTech employees.
- BTi/CoreTech functions as DraftKings’ undisclosed illegal gaming division.
The Hindenburg hit DraftKings’ stock
The report goes on, concluding with two points:
- DraftKings’ model of aggressively burning cash on promotion and marketing to acquire customers in the near term, despite a lack of evidence of long-term customer brand loyalty, is not viable in the long haul.
- And finally, “DraftKings has systematically skirted the law. These violations appear to be continuing to this day, and all while insiders aggressively cash out amidst the market froth.”
A DraftKings spokesman dismissed the report as an attempt to drive down the share price, as LegalSportsReport noted. The stock dove to below $40 a share that day but was back above $50 within a week.
Despite that, Loop Capital analyst Daniel Adam predicted on June 25 that DraftKings would beat Q2 projections.
The company’s stock had reached near $72 a share in early March, dropping to about $41 in May. DKNG spent much of June above $50 before dropping to $48.75 on Wednesday, July 7.
$RSI stock also peaked too soon
Stock in Rush Street Interactive ($RSI) more than doubled in value between November and January, rising to more than $24.
The company entered the market just before January and just became part of the Russell 2000 and Russell 3000 indexes.
But shares are either down or drifting since May, recently trading around $13, despite projected growth.
Rush Street has plans to enter more markets as they become available. And recently, they secured market access deals in West Virginia, Ohio, Maryland, and Missouri.
They have projected revenue for 2021 between $420 million and $460 million. That’s up from a previous estimate of $320 million. If they hit the halfway point of their projection ($440 million), it would be a 58% YoY increase.
The stock closed Wednesday at $11.15.
Gambling stocks not quite as shiny as before, but $BYD seems consistent
Both Zacks and Deutsche Bank have recently upgraded Boyd Gaming Corp. ($BYD). Boyd owns Valley Forge Casino, which has an online presence with FanDuel Casino and Sportsbook in PA, which holds the highest sports betting market share. Boyd also plans to build a mini-casino in State College.
Shares have gained 203.6% over the past year, and while prices have come down from their $67.69 high in early May, the price has not dropped as sharply as the other gaming sector stocks.
At closing Wednesday, the price was $56.68.
Casino stock watcher Frank Fantini sees the gambling shares drops as inevitable given the earlier big bounces.
As he told PlayPennsylvania in May, investors now are “taking a more sober look” at gaming stock prices and looking around at alternatives.
“The next new thing. That’s human nature,” said Fantini.
Lead image via Dreamstime.