Why Are Online Gambling Stocks Plummeting? ► FINCHANNEL

When it comes to growth assets, online gaming stocks have been among the top hottest items on the market at the end of 2020. Although this industry has been around since the mid-1990s, when Antigua and Barbuda passed the Free Trade and Processing Act, it lags far behind the brick and mortar sector, showing only a fraction of his annual income. However, due to the lockdowns brought about by the pandemic and the increasingly lax positions of governments regarding internet betting, online gambling had a chance in its arm in 2020.

In February, market research firm Fortune Business Insights released a report titled Online Gaming Market 2021-2028which predicts that the global market will swell to generate $ 158 billion per year by 2028. For comparison, its current size is around $ 66 billion. Vegas Style Slots remain the most profitable game for new online casinos 2022.

Nonetheless, despite the generally positive outlook for the global industry as a whole, US-based online gambling stocks are not only failing to deliver, they are currently in freefall. After seeing impressive growth in the first few months of 2021, DraftKings, Golden Nugget Online Gaming, Gan Ltd and Pen National have noticed a significant drop in stock prices late April and early May. For example, DraftKings shares were trading at $ 70 a share in mid-March, but fell to $ 40 in mid-May. We explain why this happened and who is to blame below.

Land establishments resume operations

There is no doubt that real-world gaming establishments taking a hiatus during part of 2020 have helped spark interest in interactive games. Not only that, but once the physical sites opened their doors, they had to operate at half capacity and follow security protocols that limited their appeal. The Nevada Gaming Control Board announced that the state’s gambling revenue for fiscal 2020 had fallen 25%, making it clear that the lack of foot traffic on casino floors was contributing to the increase in number of users of gaming sites.

It’s also worth noting that sports betting is undergoing a digital revolution in the United States, thanks to the Supreme Court’s overturning of the Professional and Amateur Sports Protection Act in 2018. So far, fifteen states have legalized this activity, and it is slowly the case. gain momentum in each. However, in many of these territories, retail sports betting is only permitted to operate in tribal or commercial gaming venues. Therefore, open casinos meant retail betting shops were back as well, removing some of the online user pool.

Online gambling is not yet profitable

In the past, most gambling brands were privately held, keeping the industry under wraps. Over the years that has changed, as many behemoths in the industry have become public companies whose shares trade on the New York, London and Stockholm stock exchanges. This helped to better understand the functioning of these entities. It turned out that most of them are far from profitable.

Reaching customers is expensive and the competition is not only vast but fierce. So spending hundreds of millions of dollars on marketing is pretty much the norm for those who want to stay competitive at a high level.

DraftKings became a publicly traded company in April 2020, and it’s America’s largest pure-play brand. While it’s true that DraftKings’ revenue is growing every quarter, it’s also evident that their administrative expenses are slowly exceeding them. Naturally, these trends should change as the business grows. However, the associated wait time and market uncertainty is pushing back many investors.

Online gambling actions are still worth considering

In mid-2020, brokers were encouraging investment in online gambling. The logic behind such a move was that the global pandemic would lead to substantial state budget deficits, which would lead local governments to seek new tax revenue. One of the easiest ways to close these financial holes is to pass online gambling legalization. While this has happened in several states, including New York City, online game stocks are now dropping dramatically.

Still, that doesn’t mean they’re a total bust. The Roundhill Sports Betting & iGaming ETF appears to be holding up, and the same can be said for Esports Technologies. The latter is a Las Vegas-based company that facilitates betting on Esports, a booming industry that may soon explode. Especially once video game fans are allowed to witness top competitions again.

To wrap up

While it is true that many online gaming stocks have seen massive declines over the past two months, it should be noted that most of them are even higher than they were before the pandemic. . Brands active in this industry also have other sources of revenue from which they can redirect cash flow to fund their remote gaming efforts. So, it’s a game of waiting to see if these companies can overcome this bump and handle the incoming competition. Rumors say that Las Vegas Sands and MGM Resorts are looking to expand into this area.

About the Author

Shelly Schiff has worked in the games industry since 2009, mainly on the digital side, employed byOnlineUnitedStatesCasinos.com. However, during her eleven year career, Shelly has provided content for many other top interactive gaming websites. She knows all about slots and has extensive knowledge of the most popular table games. His golden retriever Garry occupies most of his leisure time. However, when she can, she enjoys reading Jim Thompson-style detective novels.

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