Investors in the sports betting stock sector are becoming all too comfortable with the dismal headlines attached to DraftKings’ earnings reports. However, while some of the most visible brands in the space have seen share prices fall in excess of 60% in the last six months, other contenders for US sports betting supremacy are proving to defy these trends.
MGM Resorts International (NYSE: MGM) has not only outperformed its most vocal competitor, it has actually managed to trade slightly up (+4.16) over the last six months. As we highlighted in our coverage of the industry’s recent quarterly returns, investors have become growingly concerned with the excessive spending and acquisition costs seen in DraftKings, a fear that has made itself evident on the trading floor.
In this week’s Guaranteed Money podcast, hosts Ryan Doyle and Anthony Varrell discuss MGM’s recently announced plans to make an entrance into the Canadian market. Previous estimates have estimated that the Canadian sports betting market value could exceed that of some of the US’s largest states, and supremacy north of the border would go a long way in the race for dominance in the North American market.
While DKNG shares slid following the return, other sports betting operators saw slight lifts as investors were keen to support brands that appear to have a better grasp of their spending habits.
Last week we outlined how Caesars Entertainment managed to defy these trends and slowly emerge as a serious contender in the race for market share, but MGM is proving to be one of the most promising of the big four on the board.
MGM and Caesars are unique in that they both benefit from the resurging Las Vegas tourism industry, and with hundreds of thousands of vacationers flooding their casino floors, these industry giants are seeing their coffers fill.
Fresh off of the most bet Super Bowl in the event’s history, historic handles were met with historic advertising and acquisition costs. For operators limited to sports betting products, returns are limited to the standard 7% (give or take) margins often seen in sports wagering.
Operators offering slots, card games, and your more traditional casino offerings operate with much greater profit margins. While these gaming options are usually limited to the casino’s brick-and-mortar establishments, they do go a long way in balancing out the spending needed to promote and advertise their sports betting products in locations where they have no physical presence.