Sports Betting Stock Prices Struggle Ahead Of Super Bowl
It’s been a confusing and frustrating run for investors in the popular sports betting stock DraftKings (NASDAQ: DKNG), as early hype had all but guaranteed that this was a stock that couldn’t lose.
Well, leave it to a sports betting stock, of all things, to prove that there are no sure locks when it comes to picking winners.
Many investors had hoped that the NFL playoff season would see DraftKings share price rebound from their five month dive, but Monday’s closing bell saw shares trading at $21.50 just a few days out from the NFL’s biggest day. This is in sharp contrast to the $63.58 the same stock demanded at the start of the season.
Yesterday’s -1.78% dip also saw the sports betting stock suffer losses greater than those seen by other companies on the S&P 500, which averaged a -0.37% loss on the day.
Before we get too far ahead of ourselves, the sports betting and iGaming industry continues to offer plenty of upside. The spread of regulation and the eventual relaxation of laws limiting online casino offerings will only lead to more profits and better margins for those in the space.
The gambling giants controlling the North American market today are indeed overspending in the race for market share, but as the market matures and legislation makes way for online casino offerings, this existing client-base will prove to be the difference maker in the race to profitability.
As in sports betting, the payout associated with a winning wager can differ greatly depending on when the bet was placed. A wager on a Bengals’ Super Bowl win back in August would pay out close to 200-1, while that same bet now would net only a fraction of that number.
The sports betting stock hype has worked in reverse somewhat, where the hype and lofty expectations for the young industry severely inflated the prices, only to see them tumble as more substantial data became available.
In the race for regulation, sports betting advocates had touted impressive revenue estimates well into the billions for the emerging market. This same press meant to garner support for the adaptation of regulated sports betting was somewhat misleading to those unfamiliar with the aggressive marketing and advertising spends that gambling companies are often required to implement to secure and maintain market share.
Investors piled on, despite the poor quarterly returns served up by the gaming companies, who seemingly moved the goalpost with each investor’s day presentation.
Poor numbers were often countered with talks of a post-Covid sporting environment, a legalized New York market, and a hopeful entrance into the untapped Canadian marketplace.
Well, New York is now legal and shattering records, and Canada’s legalization has come and gone. Yet, the markets continue to sputter.
To those who bought in on the hype driven early rush… Well, I’m sorry.
Your instincts were not bad, but you showed up to the party a bit too early before a more accurate value point was identified.
With brands like DraftKings hovering around the $20 mark, this stock is a ‘buy’ all day in my book, as the upside potential remains huge and the pendulum will eventually swing the other way.