With AI dominating headlines again, I’m pulling my best Monty Python impression…
“And now for something completely different.”
Let’s look at sports betting stocks through the lens of Green Zone Power Ratings.
This idea popped into my brain as I was sitting in the nosebleeds on Monday night, watching my Florida Panthers smother the Edmonton Oilers in Game 2 of the Stanley Cup Final:
My view of pregame warmups from the top row … not bad!
Besides the fact that hockey is the greatest live sport to watch — hands down — I was reminded of how nice it is to watch a sporting event without getting knocked over the head with advertising (some of the worst offenders lately being those from popular sports betting companies).
I was able to sit in the nosebleeds of this chilly arena, sip my $25 beer while watching Aleksander Barkov lock Connor McDavid down and scream my head off alongside 19,000 of my fellow Cats fans.
The best part? It broke my playoff curse! I finally got to catch a postseason win in person after attending four brutal losses over the years.
It was a good night…
Now, with a clearer head after a few recovery days (ha!), let’s see if sports betting stocks are getting any postseason bump.
The Sports Betting Mega Trend
Sports betting is here to stay.
It’s legal in some form across 38 states and Washington D.C. In November, Missouri and Oklahoma could also have legalization on the ballot.
And with online sports betting making it easier than ever (no need to call that seedy bookie), people are placing wagers left and right.
Statista projects the U.S. online sports betting market will generate $9.6 billion in revenue in 2024 and grow to $17 billion by 2029, which equates to a 12% compound annual growth rate. The number of users placing bets is expected to increase to more than 54 million over the next five years.
That explains why ads from companies like DraftKings or FanDuel bookend every game broadcast, sports panel show or postgame podcast.
With the sports betting mega trend gaining traction, I wanted to see how some of the bigger names look in Adam O’Dell’s Green Zone Power Ratings system.
Maybe there’s a hidden gem to ride this sports betting mega trend to profits as 2024 rolls on…
Sports Betting Stock Ratings
DraftKings Inc. (Nasdaq: DKNG) is coming up on five years since it started trading publicly on the Nasdaq exchange in July 2019.
During that time, its customer base grew steadily. Active monthly users doubled to 1.9 million between 2020 and 2022 before hitting 3.5 million in the fourth quarter of last year.
The stock is up almost 300% since then, but Green Zone Power Ratings isn’t high on DKNG right now:
DKNG’s Green Zone Power Ratings in June 2024.
DraftKing stock rates a “High-Risk” 12 out of 100 in our system. That means it’s set to underperform the broader market over the next 12 months.
Digging deeper, DKNG’s Momentum rating of 88 is about the only bright spot. The stock is up more than 16% year to date, edging the S&P 500’s 14% gain over that same time.
However, its low ratings on fundamental factors like Growth and Quality are red flags. The company reported a 52% increase in revenue year over year for the first quarter of 2024, but it also posted negative net income, negative net profit margins and negative operating income. DraftKings is spending a lot to keep growth going.
Simply put, there are better opportunities out there…
But maybe not in PENN Entertainment Inc. (Nasdaq: PENN):
PENN’s Green Zone Power Ratings in June 2024.
With a 1 out of 100 rating, Green Zone Power Ratings is ice cold on PENN stock.
PENN operates 43 casinos across the U.S. and has partnered with ESPN and theScore to offer online sportsbooks as this mega trend develops.
Like DraftKings, PENN stock rates poorly on fundamental factors, but unlike DKNG, it hasn’t been the benefactor of momentum in 2024…
Year to date, the stock is down more than 28%!
Shares have been trading higher over the last month as acquisition rumors swell. But if you’re sticking to Green Zone Power Ratings, PENN is a hard pass.
I may roll my eyes at every sports betting ad I see while cheering on my Cardiac Cats, but I know this mega trend is here to stay.
For now, though, Green Zone Power Ratings helped me find two stocks to avoid. And I’ll take that win…
Until next time,
Chad Stone
Managing Editor, Money & Markets Daily