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Coronavirus Boosts iGaming Prospects: 3 Stocks to Watch Out For

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Following the unfolding of pandemic scenario in the past year, the casino industry has begun to recover.  

With the easing of government-mandated restrictions coupled with widespread deployment of vaccines, the casino industry is witnessing pent-up demand in gaming and entertainment offerings. Notably, stronger visitation from younger demographics coupled with increased spend per visit have been aiding the industry. Although, guest counts from destination travelers remain below pre-pandemic levels, higher rate of hotel reservations coupled with a pent-up demand for non-gaming amenities are indicating revival of growth.

Meanwhile, casino operators continue to focus on a disciplined operational approach through streamlining of business, optimization of marketing initiatives as well as renegotiation of vendor and third-party agreements. Also, the companies have increased their focus on the levels of services and staffing to welcome gamers with enhanced safety and social-distancing protocols.

High Hopes on iGaming Business

Given that the pandemic had stopped customers from entering casinos in 2020, there has been a notable migration from offline to online gambling activities. It comes as no surprise that iGaming usage has spiked on the idea of providing a digital platform to gamble as well as to stay entertained and connected with friends.

In this regard, casino operators are investing heavily in digital initiatives to improve reliability and customer services. Also, partnerships are being formed to handle the spurt in demand for online casino platforms.

Given the evolving trends in digitalization, companies have started accepting blockchain and cryptocurrencies in return for their services. Markedly, the approach makes it an industry (first of its kind) to open doors for potential new form of payments.

Owing to the actions and perseverance of the companies, it is worth mentioning that sports betting and iGaming have not only boosted April figures but have also moved the overall gaming revenues past pre-pandemic levels.

Per the American Gaming Association, commercial gaming revenue in April 2021 increased more than 26% compared with 2019 levels. The upside was primarily driven by a surge in iGaming gross revenues, which contributed $299.9 million in April 2021, thereby surging 714% from 2019 levels.

Nonetheless, the Zacks Gaming industry has outperformed the S&P 500 index in the past six months. Notably, the industry has rallied 20.2% in the past six months compared with the S&P 500’s 16.8% growth.

Our Take

Given the positive feedback for online platforms along with state-wide regulatory acceptance, we believe that the gaming industry will outperform in the upcoming periods as well. Notably, much of upside potential persists as companies are likely to tap on growth prospects on account of more live online casino game introductions.

Investing in the gaming sector might sound profitable right now. It is worth noting that the Zacks Gaming industry is currently at the top 48% (with the rank of 119) of the 250 Zacks industries, which hints at further growth.

3 Solid Picks

Here, we have highlighted three stocks that have not only performed better than the industry in the past six months but also boast solid prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment ResearchImage Source: Zacks Investment Research

Boyd Gaming Corporation (BYD - Free Report) : Boyd Gaming is a multi-jurisdictional gaming company. The Zacks Rank #1 company owns and operates gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania.

Given a high promotional capital-intensive and competitive landscape, we believe that partnership with FanDuel is likely to drive positive cash flows in the upcoming periods. This along with legalization of sports betting in additional states is likely to add to the positives. Apart from FanDuel, the company continues to focus on Stardust brand to expand its online gaming presence. Nonetheless, the Zacks Consensus Estimate for the company’s current-year earnings has been revised 53.3% upward in the past 60 days. The stock has returned 54.3% in the past six months.

Century Casinos, Inc. (CNTY - Free Report) : Century Casinos primarily engages in developing and operating gaming establishments as well as related lodging, restaurant and entertainment facilities. The Zacks Rank #2 (Buy) company operates in the United States, Canada and Poland.

In terms of online gaming, the company is optimistic owing to partnerships with Circa Sports, William Hill, bet365, Rush Street and Tipico. Moreover, the potential licensing for online sports betting in Canada could provide significant upside as well. Going forward, the company expects to enter the online space with its own brand. The Zacks Consensus Estimate for its current-year earnings has been revised 346.2% upward in the past 60 days. On a year-over-year basis, its earnings estimates for 2021 indicate year-over-year growth of 119.9%. The stock has returned 149.6% in the past six months.

MGM Resorts International (MGM - Free Report) : MGM Resorts owns and operates casino resorts through wholly-owned subsidiaries.

Ever since the launch of BetMGM (online gaming) in 2018, the company has done extremely well. With operations in 12 states, BetMGM continues to gain market share. During first-quarter 2021, BetMGM reported solid results on the back of market share gains in existing markets as well as new entries such as Iowa, Michigan and Virginia. As of February 2021, BetMGM’s market share stood at 22% in its active markets. It also displayed strengthening of position in New Jersey with market share gains of more than 30%. Meanwhile, BetMGM operations contributed $163 million to net revenues during first-quarter 2021. Markedly, the operation results are encouraging compared with total net revenues of $178 million in 2020. The Zacks Rank #3 (Hold) company is expected to report year-over-year earnings growth of 15.4% in 2021. The stock has returned 46.4% in the past six months.

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In-Depth Zacks Research for the Tickers Above


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MGM Resorts International (MGM) - free report >>

Boyd Gaming Corporation (BYD) - free report >>

Century Casinos, Inc. (CNTY) - free report >>