“The propensity to gamble is always increased by a large prize versus a small entry fee, no matter how poor the true odds may be.” – Warren Buffett
Ahhh the casino, there is nothing quite like it.
The flashing lights, the intoxicating smells, and the infinite desire to leave wealthier than you came in.
No matter how many times they tell us, “The House Always Wins,” we come crawling back for more, hoping that the stars align and our fate has changed for the better.
When done responsibly, gambling or betting can be an exciting way to make a quick buck without having to exhaust your efforts.
And with a variety of new online gambling opportunities at our disposal, the chance to strike rich has never been more tempting.
But what if you could truly tilt the odds in your favor?
What if instead of being the gambler yourself, you become the casino?
If that were the case, then you would go from having odds like one in a million to the much more lucrative million to one.
The house advantage would be yours and all you have to do is invest a little money.
In this article, we break down the astronomical growth of the online gambling industry, a few pros and cons of owning a gambling business, and five successful gambling small-caps to add to your watchlist.
The Online Gambling Industry at a Glance
The online gambling industry is booming, with a massive influx of gamblers looking to hit paydirt.
Here is a glimpse into the global online gambling market by the numbers:
- As of 2021, the Global Online Gambling market was valued at $57.54 billion and is expected to grow 11.7% annually, reaching a market value of $155.76 billion in 2030. (Grand View Research)
- Approximately 85% of US adults have tried online gambling with 57% of active online gamblers being female. (Gambling.net)
- As of 2019, Europe dominated the online gambling & betting market, accounting for 52% of global consumption; the Asian Pacific region is expected to be the fastest-growing market in the next decade. (Globenewswire)
- World gambling statistics show that around 26% or 2.07 billion people gamble at least once every year. (Casino.org)
- On average, Australians spend over $1,200 per person on online gambling every year; Singaporeans are second at $890 per person.
Three Reasons to be Bullish on Online Gambling Stocks
1. The Covid Catalyst
With the pandemic forcing lockdowns all over the globe, physical casinos were one of the hardest-hit industries due to their dependence on in-person consumption.
For example, the city of Macau, the gambling capital of the world, saw its GDP decline 54% in 2020, because of Covid lockdowns; Gambling makes up approx. 50% of Macau’s GDP (Reuters).
Fortunately, gambling, along with many other industries, found a way to overcome lockdowns through online platforms, with around 64% of players increasing their online gambling activities during the lockdowns (Gambling Commission UK)
2. Major Ad Spending
With a major uptick in demand for online betting platforms, gambling companies are expected to spend $1.8 billion on advertising in the US in 2022, up from $1 billion last year. (BIA Advisory Services)
This is beneficial for not only the companies spending the money but also the industry as a whole because it generates excitement and positively changes the narrative about gambling in general.
3. Low-cost Business Model
Unlike physical casinos, online gambling companies significantly reduce their expenses by eliminating the need for property, labor, equipment like slot machines, and maintenance on that capital.
Not only that, but they also gain an advantage by reaching broader audiences given that location is no longer a limitation and the majority of people own a smartphone or some device with internet access.
Three Reasons to be Bearish on Online Gambling Stocks
1. Addiction
Gambling is a highly addictive activity that may be elevated due to the ease of access created by online gambling platforms.
As of 2022, over 10 million Americans have a gambling addiction. (The Recovery Village)
If an online gambling company chooses to prioritize profits over the well-being of its customers, then this may lead to problematic behaviors and possibly even financial ruin if unchecked.
2. Zero-Sum Game
While the odds are certainly in your favor as the owner of an online casino, gambling and betting are ultimately a zero-sum game meaning that no matter what the outcome is, there is only one winner and possibly multiple losers (usually the customers).
In general, at least 24% of gamblers experienced financial problems directly from online gambling. (Money and Mental Health Policy Institute)
3. Intense Regulation
Although online gambling has seen significant growth in recent years and regulations have loosened in multiple regions, it remains a highly regulated market that often tightens during poor economic conditions.
In fact, in the United States, 16 out of 50 states have made gambling illegal and do not intend to pass a bill that would otherwise make it legal; these states include Washington, Texas, Utah, and others. (Online Casinos Elite)
The Five Best Small-Cap Online Gambling Stocks to add to Your Watchlist
Super Group ($SGHC)
- Market Cap: $1.951 billion USD
- Price: $3.98 USD
- YTD Change: -59.88%
- CEO: Neal Menashe
Overview: Super Group is the holding company of a premier online betting and gaming brand, Betway. With over 60+ brand partnerships and licenses throughout Europe, Africa, and the Americas, Betway offers first-class sports betting and casino entertainment across the globe.
Super Group’s Edge: The company is loaded with over $71 million in free cash flow and only $20 million in total debt meaning that it is well-fortified against any economic headwinds and will continue its growth strategy without disruption.
SciPlay ($SCPL)
- Market Cap: $0.321 billion USD
- Price: $13.58 USD
- YTD Change: -1.45%
- CEO: Joshua Wilson
Overview: SciPlay is a leading developer and publisher of digital casino games on mobile and web platforms. The company combines a data-driven approach and advanced game economy, to create a thrilling gaming experience while staying true to the authentic spirit of the biggest casino brands in the world.
SciPlay’s Edge: Through successful acquisitions and game development, SciPlay has built an unstoppable portfolio with more than 1500 real-world slot and table games that have achieved multiple “#1 Free Game in the iOS App Store” and over 300 million total downloads since 2019.
Golden Entertainment ($GDEN)
- Market Cap: $1.165 billion USD
- Price: $40.86 USD
- YTD Change: -19.14%
- CEO: Blake Sartini Sr.
Overview: If you’re looking for a gaming company with more tangible assets, Golden Entertainment is the owner and operator of a diversified entertainment portfolio filled with over 17,000 slots and table games, 10 casinos, 6,200 hotel rooms, 60 taverns, and a variety of video gaming devices at 1,100 different locations.
Golden’s Edge: With such a broad portfolio of tangible assets, Golden has solidified itself as a go-to place for all things gaming and entertainment. As some customers may seek a more authentic casino experience, the company has effectively filled that need across multiple high-value markets.
PLAYSTUDIOS ($MYPS)
- Market Cap: $0.545 billion USD
- Price: $4.23 USD
- YTD Change: +7.09%
- CEO: Andrew Pascal
Overview: PLAYSTUDIOS is a successful developer of casual, free-to-play games for social platforms, spanning three different continents. In addition to its games, PLAYSTUDIO has established a variety of strategic partnerships with major players like Activision Blizzard and MGM Resorts International.
PLAYSTUDIO’s Edge: The company’s competitive advantage lies in its strategic partnerships with companies like MGM Resorts International given that it owns the exclusive social gaming and mobile rights for MGM’s premier properties. By establishing strong relationships like this, the company can leverage its network and grow its business while ensuring sustainable long-term success.
DoubleDown Interactive ($DDI)
- Market Cap: $0.489 billion USD
- Price: $9.86 USD
- YTD Change: -36.39%
- CEO: In Keuk Kim
Overview: DoubleDown Interactive is a developer and publisher of digital games on mobile and web-based platforms for casual players in South Korea. The company offers multiple games including DoubleDown Casino, DoubleDown Classic, DoubleDown Fort Knox, and Undead World: Hero Survival games.
DoubleDown’s Edge: Despite only being one year removed from its IPO, the company has generated over $71 million in Free Cash Flow and is looking to expand quickly shortly through acquisitions. With its main revenue driver being DoubleDown Casino, DoubleDown has effectively captured the South Korean casual gaming and gambling market.
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We are not brokers, investment or financial advisers, and you should not rely on the information herein as investment advice. If you are seeking personalized investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Please do your own research before investing, including reading the companies’ public filings, press releases, and risk disclosures. Information contained in this profile was provided by the company, and extracted from public filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it. The commentary and opinions in this article are our own, so please do your own research.
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