Should You Invest in iGaming Stocks in 2021?

Posted by Harry Kane on Friday, February 19, 2021

We all know that 2020 was an unprecedented year for iGaming across the globe, from market leaders such as the UK to the burgeoning industries in the US and even Eastern Europe.

While there are many ways to gauge this, few are as effective as the performance of relevant iGaming stocks over the course of the previous 12 months.

In this post, we’ll appraise the performance of various online stocks and the market as a whole in 2020, while asking whether this year offers renewed hope for investors across the board?

Traditional vs. Online Casinos – A Tale of Two Entities

Even a cursory glance at the market performance of gambling brands in 2020 makes for stark reading, especially when comparing the fortunes of traditional casinos and their online contemporaries.

More specifically, brick-and-mortar establishments such as Las Vegas Sands and Wynn Resorts both underperformed and lost value, whereas online entities such as the U.S.-based DraftKings grew to more than triple their value during 2020.

Conversely, multi-channel operators such as William Hill endured a significantly mixed year, with the brand’s share price fluctuating wildly over the course of the year.

For example, this stock plunged to a low of just 36.70 on 18th March, before climbing to a peak of 313.00 on 25th September. The latter followed an exponential rise in the third quarter, as William Hill continued its expansion into the US while (interestingly) transitioning more of its business online.

These figures are telling, and while they obviously hint at the overt challenges facing operators in 2020, they also betray a wider trend that has continued to evolve over the course of the last decade.

We’ve certainly seen iGaming evolve to account for a larger share of the total gambling industry, particularly in the UK. Here, the total GGY for iGaming peaked at £5.7 billion in March 2020, rising by 8.1% year-on-year while growing to account for more than 38% of the overall marketplace.

This trend was further accelerated by the decision to impose a £2 FOBT cap on offline bookmakers back in 2019, which slashed the brand’s offline revenues by more than 50% and cost William Hill nearly £1 billion alone.

As a result of this, the company also reported huge losses of £64 million in the first half of 2020, with this contributing heavily to the sustained loss of share value during the same period.

The takeaway here is clear; as online brands will continue to see their prices rise as they become increasingly dominant, whereas traditional operators are likely to endure restricted growth for the foreseeable future.

As for multi-channel operators, most have overcome short-term volatility by focusing almost exclusively online and targeting international markets, enabling them to recover much of their value prior to the start of 2021.

Is iGaming a Viable Option for Investors in 2021?

With these points in mind, it seems clear that iGaming remains a viable option for investors in the current climate, with this likely to remain the case throughout 2021 and beyond.

The key is to focus on robust and high-growth stocks, particularly those that benefit from the high levels of excitement that surround the marketplace and are able to offer huge returns over an extended period of time.

To understand this further, let’s take another look at William Hill’s share and earnings performance during its wild 2020. As we’ve already touched on, the brand recovered well from its initial crash in March, while it continued on an upward trajectory even after its £64 million loss was reported towards the end of August.

Incredibly, shares in William Hill actually rose by more than 5% in early trading shortly after this announcement, with one of the main reasons for this being the longer-term potential of the brand and the incredible buzz that continues to surround the iGaming market as a whole.

This also highlights how the share price of certain brands remains disproportionate to real-time earnings, and this is another key indicator of long-term growth potential to investors.

The same rule can be applied to the US brand DraftKings, whose value trebled in 2020 despite reporting relatively modest revenue of $400 million and significant fiscal losses during the same period.

With a total market capitalisation of around $18.4 billion, DraftKings is also far more investible than any traditional casino platform in the market, even those that generate billions in cash flow each year.

The truth is that these stocks remain well-insulated against revenue declines and macroeconomic factors, while the innovative technology and huge consumer demand that underpins them also contributes to overwhelmingly positive sentiment.

This should be appealing to investors, particularly those that want to invest in reliable iGaming stocks that are likely to grow at an even faster rate during 2021.

What are the Best Bets in Gambling Today?

There’s a good reason to treat gambling as an investment as an individual player, but what are the best bets from an investor perspective in 2021?

There’s an argument that multi-channel operators may offer the best bet in the coming months, not least because there’s likely to be a short-term uptick in offline casino revenues over the course of the year.

This, combined with continued growth for iGaming ventures and sportsbooks during the same period, has the potential to create huge momentum for multi-channel brands that retain an international interest.

As a result, William Hill offers huge potential in 2021, as does MGM resorts. The American company hit the headlines recently, having made an $11 billion (£8.1 billion) offer for the British gaming firm Entain (which owns the UK giant Ladbrokes).

While this bid has proved unsuccessful so far, MGM is expected to return with a renewed and increased offer in the future.

Make no mistake; the completion of this deal would send MGMs’ value through the roof, so snapping up stock now offers the potential for both short and long-term profitability this year.

Of course, there’s no such thing as an infallible bet in the world of investment, but these stocks undoubtedly offer significant value even in a volatile and fast-evolving marketplace.