One industry that has fared very well during the global pandemic has been the online gaming sector. As people spend more time online even during office hours, they are looking for ways to occupy their time and diminish the boredom of restricted movement. Let’s look at which stocks you should invest in to get a piece of the action.
- Evolution.
Evolution along with Ikea is Sweden’s big export. Their business model is b2b so you may not be familiar with its brand but you will have heard of its impressive client list like DraftKings, 888, Betway, Genting and Hard Rock Casinos. It has soared 10-fold in the last 2 years to a price of 1,422 Swedish Krona. It produced sales of 2.52bn krona last year and has grown by more than 30% year on year since 2018. It supplies many online casinos with live betting tables, with over 550 casino tables for poker, roulette and blackjack, Sic Bo and Baccarat.
It owns NetEnt and recently acquired Big Time Gaming ,both big brands in the industry. They make 10% on all their tables as a commission so, their model is great for profit and of course, they don’t pay anything on table losses. They are rolling out studios in multiple states in the US because the tables still have to be inside state borders to comply, unlike Europe where they can operate from a central location and as they have first-mover advantage they will be able to capture more of the casino contracts. This gives Evo a clear growth plan for the next 5 years so, we see the stock a strong buy.
- Playtech PLC.
This company was founded in 1999 and based in the tax haven Isle of Man. It’s a big player in the online gaming space, providing software, apps and live betting to many casino, sports betting, bingo and poker sites. The ticker is PTEC and the stock hit an all-time high of £9.92 pounds back in Apr 2017. At £4.11 now, it has dropped to less than half since that peak but shows there are buyers out there at those sorts of prices giving it easily 250% upside. The brand is one of the largest producers of xo slot titles in Asia.
- Entain PLC.
Formerly known as GVC Holdings PLC, actually based in London, this company is a dominant player. If we list the consumer brands it operates you will see why. The Bwin brand for online casinos, bingo and sports betting, Ladbrokes the high street bookmakers, Coral the high street bookmakers (both of which have built a strong online presence as well), Sportingbet, Partypoker, PartyCasino, Gala Bingo, Foxy Bingo and the list goes on. Entain produced sales of £3.5 billion in 2020 and gross profit of£ 2.3 billion that’s 60% top line profits. During the Euros finals, they are said to have captured 3million bets on the games. Earnings are set to improve in analyst forecasts and if their ROE figures can close on industry averages, they will create even better returns for shareholders and even a future dividend payout. Watch this stock closely as well for further industry consolidation as they have the financial muscle and clout to get deals done.
- Flutter.
Flutter is an Irish company and well-established with consumer brands like FanDuel, PokerStars in the US, Betfair, Sky Bet, PaddyPower in the UK and Sportsbet in Australia. With an international portfolio it’s already a solid player and looks set to be one of the biggest winners in the opening up of the US. Their Fanduel and PokerStars brands are already well-recognized, Fanduel has over 8 million customers in the US. They compare favourably with the other big USA player DraftKings because of their lower stock price, lower PE. And unlike DraftKings they are a profitable operation.
Conclusion.
Which of these stocks do you like? The industry will certainly grow, it is just picking the companies that can take the most advantage of the conditions and growth prospects.
