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The gambling industry is continuously expanding as the casino and sports betting markets have a long tradition of pulling in vaster revenues every year. Despite the ongoing COVID-19 pandemic, Global Industry Analysts, a market research company, claims in its June 2021 Gambling – Global Market Trajectory & Analytics report that the worldwide betting market will reach a revised size of $876 billion by 2026. Its 2020 one was $711 billion. Within these five years, all of the sector’s segments should grow at various rates, with the online gambling category increasing quickest, at 11.4% per year. When it comes to internet casino action, online slot games represent the main source of revenue compared to other games. Reel-spinning products also dominate brick-and-mortar profit generation.
So, if this sphere is on a sustained upward trajectory, why are the stock prices of the entities that exist in this landscape cyclical? The answer lies in that its upward trajectory is chiefly reliant on cultural and legal changes. What does that mean? As time passes, gambling becomes less of a taboo subject in most territories, and governments’ regulations towards it grow laxer. It becomes more widely allowed, which means that new markets keep popping up. The cyclical nature of gambling stocks has more to do with social and economic events. For the uninformed, cyclical stocks have a direct relationship to the global/local economy. When it gets negatively affected by current day events, there is a substantial likelihood that they will also experience hits, as gambling operators are not immune to broad economic changes.
Things That Affect the Prices of Gambling Stocks
As mentioned, laws are a substantial factor that influences the state of this industry. Territories can make the activity legal, forbid, or restrict it, directly impacting the revenue-generating potential of the entities that operate in it. Governments aside, their regulatory bodies also have massive sway. For example, Britain’s gaming overseer, the UKGC, recently passed new measures that make the online casino experience less addictive. It did so by mandating multiple gameplay limitations get imposed on all reel-spinning titles. The move got met with disapproval from players who thought that it made internet gaming less fun. In 2015 and 2016, multiple US regulators allowed skill-based gaming at land-based venues. Such novel regulation opened the doors for operators to appeal to new demographics. Thus, different regulatory moves can expand or constrain the capacity of this sphere on a regional level.
The reality is that all sorts of things that laypeople would not even consider can affect the appeal of casinos and sportsbooks. An illustration of this point is that analysts have found a direct correlation between gas prices and casino foot traffic. In the early-2000s, the more expensive gas was, the fewer people were willing to travel to gaming establishments. However, the sector now does not suffer from this issue to the same degree. Due to its expansion, today, few casino patrons live in areas where they do not have a venue that offers casino-style entertainment within a 100-mile radius.
Before 2020, few considered that a public health crisis of the magnitude we are living through these past two years was possible. Yet, once it began unfolding, the gambling industry was one of its most notable victims. The Las Vegas Sands, the world’s largest gambling operator, netted a loss of $2.1 billion last year, the same as the Wynn. Nevertheless, the stock prices of both these conglomerates surged in late August once Macau eased restrictions for visitors from mainland China. That event is evidence of how dramatic fluctuations in prices can happen in this sector owing to new government measures.
Best Gambling Stocks to Buy Right Now
Predictions are that the US casino industry will get back on track, reaching the 2019 pre-pandemic size in 2023. That is a projection from Fitch Ratings which estimates that casinos’ U-shape rebound will transpire faster than the previously predicted mid-2024 date. While land-based gaming locales are struggling to stay afloat, sports betting apps are gaining tremendous traction due to mobile sportsbooks getting legalized in over twenty US states since 2018. Thus, the common belief is that DraftKings and Flutter Entertainment, which owns FanDuel, are solid investments. Their competition for the US sportsbook market comes from Caesars Entertainment which acquired UK betting giant William Hill, and MGM Resorts, which hopes to buy out FTSE 100 company Entain plc.
Final Thought
Gambling stocks have been and still are cyclical. However, in the past two decades, the industry has gone through fundamental changes. These will likely contribute to its stability. New jurisdictions now allow betting, and gaming demand is at an all-time high. Expect to see top brands expand in new markets and shift their business onto the internet as they keep growing.
About the Author
Shelly Schiff has been working in the gambling industry since 2009, mainly on the digital side of things, employed by OnlineUnitedStatesCasinos.com. However, over her eleven-year career, Shelly has provided content for many other top interactive gaming websites. She knows all there is to know about slots and has in-depth knowledge of the most popular table games. Her golden retriever Garry occupies most of her leisure time. Though, when she can, she loves reading Jim Thompson-like crime novels.
