- The current state of the financial markets present some attractive opportunities for long term investors.
- Sports betting is the biggest growth catalyst in the casino gaming industry.
- Many otherwise solid gaming stocks are selling at 52 week lows due to the COVID-19 panic.
It’s definitely an ugly time in the world financial markets as they’ve been hit by the double whammy of the COVID-19 virus and the oil price war that has resulted from the collapse of OPEC talks. With the markets awash in red ink, sectors such as travel and leisure are getting hit particularly hard. So to is the casino gaming industry. The carnage for gaming stocks began with casinos in Macau closing for 15 days due to the COVID-19 situation in China. They’ve since spread to companies with little to no exposure to the Asian market.
With gaming stocks trading at or near 52 week lows a number of companies have become very attractive to the long term investor. The companies in this list have a good position for growth in the US sports betting market. Since it is primarily a mobile based activity, sports betting is one type of gaming that could continue to flourish even if the COVID-19 situation worsens. Experts have talked about the ‘stay at home’ economy for years and the current climate has only hastened that already existing trend. Sports betting is one of the few types of gaming that is viable in the ‘stay at home’ marketplace. Two of the companies below provide the ‘plumbing’ for sports betting platforms and the other is a regional gaming operator that should benefit from Colorado’s entry into the sports betting marketplace. Colorado is expected to quickly become a major player in US sports betting yet is still ‘under the radar’ with traditional gaming analysts.
IGT (NYSE: IGT)
IGT has been getting brutalized of late along with other stocks in the gaming sector due to Coronavirus fears. They were downgraded by Argus Research from ‘BUY’ to ‘HOLD’ which created further selling pressure. The stock is now trading near or at a 52 week low ($6.59 at the time of this writing). They caught little benefit from beating their 4th Quarter earnings estimates due to the selling pressure on the entire sector. IGT is one of the most diversified US gaming technology companies with a strong presence in casino games, lottery infrastructure and VLTs and most significantly sports betting. IGT has quietly emerged as a serious player in the new legal sports betting landscape in the US and is currently live in 10 states processing a bet every 0.9 seconds. Arguably the best investment play in the sports betting space is on companies that provide the ‘plumbing’ for wagering platforms. IGT has already proven to be successful in this space and has recently introduced a sick new wagering terminal called the IGT CrystalBetting Terminal. They’re involved in a lot of local and regional gaming markets that won’t be hurt as much by a downturn in travel and at the same time will benefit once the larger market casinos rebound. They sure look like a nice value for the long term investor at the current price.
SCIENTIFIC GAMES (NASDAQ: SGMS)
It wasn’t that long ago (a couple of weeks actually) that Scientific Games was a darling of investors. That was before the coronavirus panic on Wall Street devastating the entire gaming sector. SGMS shares many similarities with IGT in terms of their diversification. They have more international exposure than IGT but are in the process of building a foothold in the US sports gaming market. They’re in a partnership with plenty of big sports betting companies around the world including William Hill and Boyle Sports. Overall, they offer sports betting services in 16 countries. Here in the US, they’ve partnered with the Golden Nugget for iGaming and BetFred for their initial American books in Pennsylvania and coming soon to Colorado at the Saratoga BlackHawk Casino. Colorado is seriously under the radar at the moment but they’re poised to quickly become one of the top sports betting jurisdictions in the country. They’re off of their 52 week lows (12.21 at the time of this writing) but are another ‘sports betting plumbing’ long term play that can now be had for a value price.
CENTURY CASINOS (NASDAQGS: CNTY)
Analysts are expecting improved revenue and earnings for the 4th Quarter but that hasn’t prevented CNTY from being battered along with the rest of the gaming sector. One thing that is appealing about CNTY in the current climate is their lack of exposure to any major casino gaming destination like Las Vegas and particularly Macau. They serve smaller regional markets in the US, Canada, the UK and Poland. I expect the regional gaming markets to rebound first–people might not be traveling long distances to gamble but they won’t stop betting altogether. Regional companies like CNTY should be the beneficiary. The thing I really like about CNTY is their presence in Colorado where they have eponymously named properties in Central City and Cripple Creek. They’ve forged one of the most inspired partnerships in Colorado’s nascent sports betting market, striking a deal with Las Vegas based Circa Sportsbook. Circa is the newest sports betting company in Nevada and I expect their Colorado mobile app to quickly become one of the most popular in the state. They’re a company that understands who they are and doesn’t seek to ‘hit above their weight class’. They’re also trading at a 52 week low (5.37).