With betting being legalized all over the United States, the gambling industry is becoming more and more attractive across the country. As such, betting companies present added intrigue to investors, and some of them have proven to be quite profitable, though nothing is quite sure where the market is concerned.
But is it wise for retail investors to purchase stock from sports betting companies? This article takes a hard look.
The answer to the above question is far from a simple one. Investing isn’t as simple as picking the winner of a particular game or putting a fantasy squad together. Regarding funding, especially long-term, sports betting is new on the block and remains unproven.
Newer sports betting shares have been compared to that of tech start-ups, which is why it’s worth taking the time to consider all of the factors before jumping in.
In more recent times, legislative bodies and technology have fostered many advancements.
Sports fans could not cheer for their favorite teams in person following the COVID-19 outbreak in 2020, leaving them to do all of that in front of screens. Technology has also made it possible to assemble a fantasy team in seconds and enjoy sports, while all of the biggest betting companies have made their odds available online.
Technology has made betting a whole lot easier, as well as quicker. It doesn’t take more than a few minutes to sign up to a platform via a computer or mobile phone and make your first wager.
TD Ameritrade’s Alex Coffey says the technology “has played a crucial role in advancing the engagement of fans across the world,” adding that digital tech “makes it easier and more accessible for the sports bettor to wager on games, even from the comfort of their own homes.”
Coffey explains how online gambling is a statistics-driven activity where bookmakers only try to claim a small percentage of all bets. The more opportunities for people to bet in a general sense, the more gambling companies make. They all get a slice, at least the reputable and regulated ones.
The U.S. now has several substantial gambling markets outside of Las Vegas. For example, the New York sports betting market is proving to be one of the strongest in the States, with the region boasting several popular sports teams, including the New York Yankees, Knicks, Jets, Giants, Brooklyn Nets, and Buffalo Bills.
Morgan Stanley projects that the gambling industry will rake in $7 billion by 2025, increasing eight times from 2019.
Coffey reckons the growth is representative of sports betting becoming part of American culture as it’s no longer considered taboo. The media is also pretty big on gambling, and the practice is promoted during broadcasts of live games now.
“At one time, football announcers wouldn’t talk about point spreads on the air. It was never part of the conversation,” he noted. “Now, it’s a commonplace for broadcasters and studio analysts to acknowledge gambling aspects. There’s more of a national acceptance.”
Regarding the risks attached to buying sports betting stocks, it’s hard to say. Some companies might not even be around a few years from now. The growth potential, though, doesn’t seem to have a ceiling, especially given the rapid rate of legalization across states. Many states that do not offer legal gambling right now will be doing so by the end of 2022 or early 2023, with laws already in place.
Of course, other factors will come into play.
“This is truly going to be something where loyalty is a major factor,” Coffey says. “How do you build brand loyalty in this space? How ‘sticky’ is the money coming into the sports betting app? Does the average sports bettor sign up for more than one app? Many may be inclined to establish a relationship with a single brand.”
Investors must apply the same due diligence they attach to regular stock purchasing when buying shares from sports betting companies. But it does appear to be a pretty sound investment corner at the moment.
