The US sports betting market has been rapidly growing in the past few years. Its current size stands at around $9.5 billion, but Ark Invest, a premium Florida-based investment management firm, claims that this figure will jump to $37 billion by 2025. It is noteworthy that this assets management entity has a position in DraftKings, which went public in 2020, competing for the crown of the number one betting corporation in North America. However, things have not been going smoothly lately for this famous daily fantasy sports operator that expanded into sports wagering in 2018.
On Thursday, November 4th, DraftKings’ stock fell by 4.6%. That is nothing new, as the company’s shares have been falling for the past several months, dropping by 35% from a peak hit earlier this year. They went down by 25% in September and October alone. DraftKings making a purchase offer for the UK betting giant Entain for $20 billion in the third week of September, which is more than DraftKings’ present valuation, made investors reconsider the potential of this fantasy sports juggernaut. What made their proposed deal interesting for the whole industry is that Entain has a 50/50 partnership with MGM Resorts for the North American market, with the pair operating under the BetMGM brand in the US. In late October, DraftKings announced that it would not make a final offer for Entain. They stated that they no longer have any intention of acquiring it, pulling their buy-out proposal.
MGM Resorts is one of DraftKings’ chief competitors. According to their earnings reports, MGM Resorts holds the number one position in this sector in the US. That spot formerly got held by DraftKings, which now has less than 50% of the market share of the Nevada global hospitality and entertainment behemoth. As the world still grapples to get a grip on the COVID-19 outbreak and return to a sense of normalcy, hotel industry stocks have virtually made a comeback to pre-pandemic levels. MGM Resorts shares are currently trending at a five-year high, with most analysts believing that the popularity of the BetMGM app is the primary culprit for this. Despite sports betting, BetMGM also offers casino-style entertainment, the same holds for the DraftKings app. The online casino market can be an excellent booster for both in the future if it ever gets regulated across all US states.
DraftKings Analysis
DraftKings got birthed in 2012, in Boston Massachusetts, by former Vistaprint employees Matthew Kalish, Paul Liberman, and Jason Robins. Their first product was a one-on-one baseball fantasy competition. Within two years of this brand’s existence, they struck a deal to become the daily fantasy sports service of the NHL (National Hockey League). A year later, they forged a similar agreement with the MLB (Major League Baseball). At that time, they also partnered with ESPN and Fox Sports. In 2018, DraftKings launched its first online sportsbook platform in New Jersey. It followed up this move by swelling its sports wagering operations into Indiana, New Hampshire, Mississippi, Iowa, West Virginia, and New York.
In March of this year, DraftKings’ stock was trading at a high of almost $72 per share. Yet, they fell dramatically by May to a price of $44. Since digital betting is rising dramatically and given that IBT data predicts that the company will only lose $1.96 per share in 2022, it has substantial upside, despite current optics. In August, they reported a better-than-expected loss, and their unique monthly player numbers jumped 281%. Thus, there is no doubt that DraftKings has promising long-term prospects. Even if it does not become the top US sportsbook operator, it will be a sector leader for years to come, for sure.
About MGM Resorts
MGM Resorts began as MGM Grand in 1987, morphing into MGM Mirage in 2000. A decade later, its shareholders voted for this corporation to change its name to MGM Resorts International. By current estimations, MGM Resorts operates around 50% of Las Vegas’ CityCenter and has a controlling interest in the investment trust MGM Growth Properties. The brand’s total assets are close to $44 billion, employing close to 74,500 people. Casinos and hotels aside, MGM also owns and operates five golf courses and has a fleet of five aircraft.
One thing to point out is that while BetMGM is growing, they are losing money. In 2020, their losses totaled $62 million. Yet, that should not worry potential investors too much, as most of their revenues come from their physical properties. So, once things get back on track to a pre-2020 level, MGM profitability should substantially increase.
About the Author
Shelly Schiff has been working in the gambling industry since 2009, mainly on the digital side of things, employed by OnlineUnitedStatesCasinos.com. However, over her eleven-year career, Shelly has provided content for many other top interactive gaming websites. She knows all there is to know about slots and has in-depth knowledge of the most popular table games. Her golden retriever Garry occupies most of her leisure time. Though, when she can, she loves reading Jim Thompson-like crime novels.
