3 Gambling Stocks to Benefit From Holiday Season Splurges

Stocks to buy

November through January are broadly considered to be peak holiday season. These three months are characterized by increased retail spending, travel and tourism, and splurges on luxuries. This includes a spending binge on casinos, online gambling, and iGaming. Therefore, from a seasonal perspective, investors consider exposure to some of the best gambling stocks. With positive earnings momentum, these stocks may deliver handsome returns in the next one or two quarters.

A long-term perspective makes the stocks appealing. As an example, the online gambling market is expected to be worth $153.57 billion by 2030. Between now and 2030, the industry will grow at a CAGR of 11.7%. And this doesn’t include offline casinos. Therefore, gambling stocks can be kept in the investment radar.

For now, let’s examine the three gambling stocks likely to benefit from seasonal growth bump-up.

DraftKings (DKNG)

DraftKings (NASDAQ:DKNG) stock appears the best bet among gambling stocks for some quick gains. DKNG stock has surged by 252% for year to date (YTD). However, the rally has been from deeply oversold levels and with positive business developments, the upside will likely sustain.

When DKNG stock was plunging in 2022, the negative catalyst was cash burn. However, the company’s revenue growth trajectory was robust. For Q3 of 2023, the company reported revenue growth of 57% on a year-over-year (YOY) basis to $790 million. Notably, the company’s adjusted EBITDA loss narrowed significantly to $153 million.

Further, DraftKings has guided for revenue of $4.65 billion for the next year. Adjusted EBITDA is expected to be positive at $400 million (mid-range). As the EBITDA margin expands, DraftKings is positioned for value creation. Given the significant industry potential, margin expansion and healthy top-line growth could sustain beyond next year.

Boyd Gaming (BYD)

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Boyd Gaming (NYSE:BYD) stock is another interesting bet among gambling stocks and trades at a valuation gap. After remaining sideways for the last 12 months, a breakout on the upside seems imminent. Just consider BYD’s forward price-earnings ratio of 9.8. Also, the stock offers a dividend yield of 1.28%.

For Q3 of 2023, Boyd Gaming reported muted revenue growth of 3% on a YOY basis to $903 million. Importantly, online gaming revenue surged by 72.7% YOY to $90.3 million.

In the coming years, online gaming revenue is likely to have a significant impact on growth and EBITDA margin expansion. Relatively lower inflation is another factor that’s likely to support margin expansion in 2024.

From a value creation perspective, Boyd Gaming has returned $1 billion to shareholders in the last two years through dividend and share repurchase. This is expected to sustain on the back of strong free cash flows.

Las Vegas Sands (LVS)

Source: Andy Borysowski / Shutterstock.com

Similar to BYD stock, Las Vegas Sands (NYSE:LVS) stock has remained sideways in the last 12 months. Valuations look attractive for this dividend paying stock. Investors can possibly expect a breakout rally on the back of seasonal growth in earnings.

For Q3 of 2023, Las Vegas reported recovery in tourism spending in both Macao and Singapore. The company reported net revenue of $2.8 billion, which was higher by 180% YOY. Further, consolidated adjusted property EBITDA was $1.12 billion.

Also, the company reported $5.57 billion in cash and equivalents as of Q3. Additionally, $4.17 billion was available for borrowing under the credit facility.

Therefore, investors can expect robust financial flexibility. The company is already pursuing expansion that includes Londoner Macao Phase II and Marina Bay Sands Phase II. For the coming year, Las Vegas expects to incur capital investment of $1.7 billion.

Overall, with strong improvement in financial metrics, LVS stock looks undervalued and poised for a meaningful rally.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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