Since the 2018 Supreme Court ruling on the Professional and Amateur Sports Protection Act (PASPA), the investment community largely focused on the US market. But some fund managers still see a lot to like with international betting stocks.
In a recent report on vice stocks, Robert Dunphy, senior portfolio manager for the Invesco Oppenheimer International Growth Fund, notes that as is the case with spirits makers, international companies dominate the sports wagering space. That group includes Entain Plc (OTC:GMVHY) and Flutter Entertainment (OTC:PDYPY), both based in the UK.
As the United States legalizes sports betting state by state, we believe these firms are uniquely advantaged. In our portfolio, we hold Flutter, the owner of FanDuel, and Entain, formerly known as Ladbrokes, which has a joint venture with MGM to roll out sports betting state-by-state,” said Dunphy.
While the US is the fastest-growing sports wagering market in the world, there is something to the notion of investors thinking globally in this segment. Familiar domestic names in this space, such as DraftKings (NASDAQ:DKNG) and BetMGM, currently have no exposure outside of North America. Conversely, Flutter and Entain are widely known throughout Europe, and the latter is the one of the largest operators in Australia.
International Betting Stocks Allure
While enthusiasm is palpable for the US sports wagering scene, some companies aren’t overlooking Europe. For example, 888 Holdings recently said it’s paying $3 billion to acquire William Hill’s international operations, including 1,400 UK betting shops, from Caesars Entertainment (NASDAQ:CZR).
As Invesco’s Dunphy notes, one of the primary sources of allure with UK-based betting firms isn’t their consumer-facing businesses, but rather back-end technology. Entain is a prime example of that theme. The Coral owner provides the technology that powers BetMGM, the second-largest online sportsbook in the US. Some believe it is the company’s tech capabilities that make it an acquisition target.
Entain is currently in talks with DraftKings regarding a possible takeover, with some experts speculating it’s Entain’s tech stack the suitor wants. If that thesis proves accurate, MGM Resorts International (NYSE:MGM) — Entain’s partner on BetMGM — might be forced to go shopping for a new tech partner in a pool that’s dwindling because of recent consolidation.
On Sunday, Aristocrat Technologies, one of the world’s largest makers of gaming machines, said it’s buying gaming software maker Playtech — another UK-based firm — at a 58.4 percent premium to the target’s Oct. 15 closing price.
The technological capabilities of companies Entain and Flutter are all the more relevant at a time when US operators are looking for new ways to engage bettors beyond basic pre-game bets.
In-game betting is widely viewed as a future revenue generator for gaming companies, and while many American sports are conducive to that activity, it requires technology.
“This supports what is called in-play betting, whereby the gambler can bet on events in the middle of a game, such as who will make the next field goal or home run,” adds Dunphy. “For instance, Major League Baseball has fitted every stadium with sensors that measure the exit velocity of a home run, another statistic that can be wagered-on. Meanwhile, the National Basketball Association’s viewership numbers peak in the fourth quarter of games. How do you convince viewers to watch the first three quarters? One way is to allow them to place in-play bets.”
The US in-game opportunity could be a boon for tech-rich international betting stocks, such as Entain and Flutter.