Sports betting is fast becoming mainstream as more states legalize it. More recently, legalization in New York state and Canada have provided tailwinds for the segment. After all, it is a steady source of tax revenue. Additionally, as esports grows in popularity, Wall Street pays increased attention to the segment as well. Therefore, let’s discuss the three best sports betting stocks to buy for 2022.
Recent research suggests that the global sports betting market should go over $140 billion by 2028. Such growth would mean a compound annual growth rate (CAGR) of about 10%.
Additionally, sports betting stocks saw significant returns in 2020, especially at the height of the novel coronavirus pandemic when many people stayed home. However, 2021 has been a different story as investors have rotated away from high-growth stocks.
For instance, the Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ) fell by 26% over the past three months. And year-to-date (YTD), the fund is down about 9.5%.
Despite the recent decline on Wall Street, top-line growth estimates for the segment remain optimistic for 2022. With that in mind, here are the three best sports betting stocks to buy that could generate lucrative returns in 2022.
Now, let’s dive in and take a closer look at each one.
Best Sports Betting Stocks: DraftKings (DKNG)
52-Week Range: $25.80 – $74.38
Boston, Massachusetts-based DraftKings is one of the most prominent names in online sports gaming and entertainment. In addition to daily fantasy sports and iGaming, the group develops sports betting and casino gaming platform software.
The company currently offers mobile sports betting in 14 states. It was also recently approved as an operator in New York, a market that could add $1 billion in annual gross gaming revenue. Furthermore, in August management announced it would buy Golden Nugget Online Gaming (NASDAQ:GNOG) for $1.56 billion, funded entirely with shares.
Moreover, DraftKings reported third-quarter results in early November. Revenue increased 60% year-over-year (YOY) to $213 million. Net loss widened to $545 million, or $1.35 per diluted share, compared to $395.7 million, or $1.11 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $2.9 billion.
On the results, CFO Jason Park remarked, “Our key performance indicators also continued to grow, as Monthly Unique Payers increased by 31% and Average Revenue Per Monthly Unique Payer grew by 38%. We are increasing the midpoint of our 2021 revenue guidance and introducing 2022 revenue guidance which points to another year of strong growth in existing states for DraftKings.”
The sports betting darling anticipates 2021 revenue to reach $1.26 billion, up more than 100% YOY. However, Wall Street is concerned about the level of cash burn, as acquiring new customers has been costly.
Overall, DKNG stock currently hovers at $28.50 territory, down 39% YTD. It boasts a premium valuation at 10.6 times trailing sales. The 12-month median price forecast for DraftKings stock stands at $63.
Esports Technologies (EBET)
52-Week Range: $16.29 – $54
Las Vegas, Nevada-based Esports Technologies offers esports wagering products and develops esports predictive gaming technologies. Its platform, Eaffiliates.com, allows affiliates to receive commissions based on confirmed deposits and revenues.
In October, management announced the acquisition of Malta-based Aspire Global’s (OTCMKTS:ASPGF) business-to-consumer (B2C) business for $75.9 million. As a result, Esports Technologies gets gaming licensing in regulated European markets such as the U.K., Ireland, Germany and Denmark.
The company reported fiscal year 2022 Q1 results on Nov. 15. Net revenue came in at $16.4 million, up from $16.2 million from the prior-year quarter. It reported GAAP net loss of $500,000, or 3 cents per share, compared to net loss of $1.8 million, or 15 cents per share, in the prior-year quarter. Cash and equivalents ended the quarter at $900,000.
On the metrics, CEO Grant Johnson cited, “With the strong start to FY22 and continued momentum in our business, we are reiterating our expectation that Esports Entertainment will eclipse more than $100 million in revenue this fiscal year.”
EBET stock is shy of $18.40, down about 44% in the past three months. Shares currently support a reasonable valuation at just 2.2 times trailing sales. Thus, interested readers could consider investing around these levels.
Best Sports Betting Stocks: GAN (GAN)
52-Week Range: $8.80 – $31.81
Our final stock is the Irvine, California-based GAN. It provides Software-as-a-Service (SaaS) solutions for online gaming as well as sports betting applications. The enterprise-level GameSTACK platform offers turnkey solutions such as payment services, analytics and account management.
Gan issued FY21 Q3 results in early November. Revenue was $32.3 million, down 7% from the prior quarter. Due to lower sports betting margins, net loss widened to $7.9 million, or 19 cents per share, up from $2.7 million in the prior quarter. Cash and equivalents ended the quarter at $50.3 million.
Following the announcement, CEO Dermot Smurfit remarked, “Our third quarter financial results were in line with our expectations as our B2B segment revenues rose
5% compared to the prior quarter, while our B2C revenues experienced seasonality following a record second quarter.”
Despite the lukewarm results, investors have noted the growth stateside, as the core U.S. business has seen an 80% YOY growth. Going forward, being a SaaS name is likely to help management grow and possibly diversify operations.
GAN stock sells for around $8.65 per share, down about 57% YTD. Shares are trading at 3.5 times trailing sales, and the 12-month median price forecast for GAN stock is $23.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on the technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.