In this article, we will look at the 11 Best Las Vegas Stocks To Buy Now.
The gambling industry is growing throughout the globe, with the United States being one of the fastest-growing markets. According to the American Gaming Association, more American adults participated in some kind of gambling entertainment activities than ever during the past 12 months. The survey found that more than 55% of American adults participated in gambling, with 28% going to a physical casino while 21% placed sports bets.
One of the key findings of the report was regarding gambling becoming more acceptable within the American population. As per the association, 9 out of 10 adults found casino gambling acceptable for themselves and others as well. This is good news for the US economy and casino companies as they will generate substantial revenues from increased acceptability of gambling. The United States commercial gaming revenue increased 8.9% year-over-year to reach $17.63 billion during the quarter. Q2 2024, marked 14th consecutive quarter of growth and was driven by casino expansion in various states of the country, including Illinois, Virginia, and Nebraska.
Sports betting is one of the major contributors to the overall gambling industry. Let’s take a look at some of the recent trends in the sports betting industry.
What’s Happening in the Sports Betting Industry
It’s hard to think about sports without sports betting or gambling. The sports betting and gambling industry in the United States has exploded in the past 6 years since it became legalized in most states across the United States. Currently, 38 states have legalized gambling and the industry generated more than $120 billion in total bets and $11 billion in revenues for 2023 alone.
In one of the recent episodes of CNBC Boardroom’s Game Plan Sports Event, the executives of FanDuel, Fanatics, and Sportradar discussed the new state taxes and betting industry trends. All the executive members on the panel found that betters are more interested in placing wagers on individual players, along with placing real-time bets during the live sports event.
Moreover, the CEO of FanDuel overturned his decision to charge a gaming supertax from its customers after his competitors decided against charging any such tax. This came in a reaction after two US lawmakers introduced a bill to address sports betting at the federal level. In one of our recent articles on 10 Best Casino Stocks To Buy According to Analysts, we discussed how the upcoming taxes are expected to affect the market. Here’s an excerpt from the piece:
Illinois lawmakers are drafting a new budget that includes a sharp increase to the state tax on sports betting operators. On May 28, CNBC’s reporter Contessa Brewer mentioned that operators in Illinois have paid 15% on sports betting since it went live in June 2021. The new tax proposal is expected to increase the tax to a range of 20% to 40% depending on gross receipts, which means that the largest betting operators are expected to be attacked the highest with this increase.
The law is yet to be passed, but if it gets approved it will make Illinois’ highest tax rate the second highest behind New York and New Hampshire. For context, Illinois is the 4th largest state for sports betting and betters wagered more than $1.2 billion in March 2024 alone. Sports betting associations are not happy with the tax proposal. The CEO of one of the largest sports betting operators in the United States mentioned that the burden of this tax is going to shift to the consumers.
There is an upcoming tailwind which is expected to boost the industry further. The football season is back and the NFL is expected to spur a record $35 billion in legal sports betting. On September 3, CNBC reported that the United States will wage $35 billion this NFL season, marking a 30% increase since last year’s National Football League.
Much has changed since the last season. During the year states including Maine, North Carolina, and Vermont have allowed sports betting operations in their jurisdictions. Amidst the upcoming season, sports betting companies are feeling the heated competition and platforms are coming up with new strategies to capture more customers.
The president of FanDuel mentioned that the NFL season is one of the biggest acquisition periods of the year. The platform has partnered with YouTube and rolled out a “Sunday Ticket” offer, where players who bet at least $5 get a 3-week trial period to watch the NFL matches with Sunday Ticket. Moreover, as more than 95% of sports betting is happening online it presents an exciting opportunity for sports betting leaders to enhance their customer base and generate more revenues.
Now let’s look at the 11 best Las Vegas stocks to buy now.
A luxurious casino entrance surrounded by lush landscaping and vibrant lights.
Our Methodology
To compile the list of 11 best Las Vegas Stocks to buy now we used the Finviz screener and ETFs. Using these two sources we first curated a list of 20 casino, gambling, and gaming stocks. Once we had the list, we then ranked these stocks based on the number of hedge funds holders during the second quarter. The list is ranked in ascending order of the number of hedge funds.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
11 Best Las Vegas Stocks To Buy Now
11. PENN Entertainment, Inc. (NASDAQ:PENN)
Number of Hedge Fund Holders: 30
PENN Entertainment, Inc. (NASDAQ:PENN) is a sports betting and casino gaming company that operates in 20 states with more than 43 properties. The company has online sports betting licensing for 18 jurisdictions and iCasino operations in 5 jurisdictions. It operates through a portfolio of renowned brands including L’Auberge, theScore Bet Sportsbook and Casino, Hollywood Casino, and ESPN BET.
The business of PENN Entertainment, Inc. (NASDAQ:PENN) is segmented based on the geographical locations it covers and includes Northeast, West, South, and Midwest segments. The company also has an online presence under its Interactive segment.
The overall market landscape of the casino and gambling industry has been challenging with a lot of competition. However, PENN Entertainment, Inc. (NASDAQ:PENN) has an advantage over the market due to its comprehensive mix of services. The company already owns a string of Brick and brick-and-mortar casinos and is now investing in mobile gaming, sportsbooks, and iGaming.
Its digital database within the interactive segment has improved by more than 81% since the launch of ESPN BET in late 2023. Moreover, the company has also significantly grown its monthly active users by more than 138% year-over-year.
On the other hand, the Brick and Mortar Casinos business has continued to be a successful venture for the company. The Hollywood Casino revenue grew 6.5% subsequently and its market share grew more than 89 bps year-over-year. The Hollywood property is not the only contender when it comes to market share growth. The Ohio property also improved its market share by 114 bps during the same time.
Despite an overall slow market environment, PENN Entertainment, Inc. (NASDAQ:PENN) has come up as a strong player in the industry. Looking forward, the growth is expected to continue at an accelerated pace as it is about to launch ESPN Bet in New York as well. New York accounts for around 6% of the total US population and is expected to add more than 10 million monthly active users to its digital database.
Hedge funds have also shown interest in PENN, which was held by 30 hedge funds in Q2 2024, with total stakes amounting to $663.69 million. HG Vora Capital Management is the top shareholder of the company, with a position worth $280.6 million.
Greenlight Capital stated the following regarding PENN Entertainment, Inc. (NASDAQ:PENN) in its first quarter 2024 investor letter:
“We established a new medium-sized position in PENN Entertainment, Inc. (NASDAQ:PENN) at an average price of $22.69 per share, but, for reasons discussed below, the shares fell to $18.21 by quarter-end. s referenced above, we established a medium-sized position in PENN, an operator of regional casinos. PENN’s current enterprise value is just over $4.3 billion, and based on an 8-12x multiple of free cash flow, we value their land-based casinos between $4.3 billion and $7 billion. PENN also competes in online gaming, particularly sports betting, and we believe the market ascribes a substantial negative value to that effort. To be fair, the online segment has a checkered history. In 2020, PENN acquired a minority stake of Barstool Sports, and three years later agreed to purchase the rest, for a grand total of $551 million. That acquisition was a complete failure, and the company wound up abandoning the investment. It also spent $2 billion in 2021 to acquire Score Media and Gaming to establish a better online sports betting platform. Last year, it entered into a deal with ESPN to launch and operate ESPN BET.
Successful sports betting franchises can have substantial value. DraftKings is the leader and is valued at over $20 billion. Through ESPN BET, PENN aspires to achieve top-three status in the industry. Given that the market is ascribing negative value to ESPN BET, it’s fair to say that after the Barstool fiasco, investors have serious doubts about the company’s strategy and management’s competence to execute. Were the market to credit PENN with merely 15% of DraftKings’ value, that segment alone would be worth $20 per share.
PENN launched ESPN BET last November. The launch was largely successful and led them to achieve a top-three user share by adding one million customers in less than two months. This result was much better than expected and enabled PENN to project turning a profit a year earlier than its previous guidance. To accomplish this, the company spent more on upfront marketing to acquire customers than it had indicated. Though we had believed the rationale for increased spending was well understood, the market focused on the higher spend and punished the shares.”
10. Churchill Downs Incorporated (NASDAQ:CHDN)
Number of Hedge Fund Holders: 31
Churchill Downs Incorporated (NASDAQ:CHDN) is an online wagering, racing, and gaming entertainment company, whose popularity is nested in its flagship event called the Kentucky Derby. The Kentucky Derby racetrack owned by the company, hosts one of the longest continuously held annual events, which helps generate generous cash flow and margins for the company.
Churchill Downs Incorporated (NASDAQ:CHDN) operates through three major segments, one is evident as per our description of the company i.e. the Live and Historical Racing. Other segments include TwinSpires and Gaming.
Similar to its Live and Historical Racing segment, the Twinspires segment also contributes greatly to the company’s revenue by operating one of the largest wagering platforms in the United States. The segment contributing around 14% to the overall revenue has grown its adjusted EBITDA by more than 85% since 2018.
For the latest quarter, a strong performance across the board was led by the Live and Historic Racing segment, resulting in 36% revenue growth and 34% earnings growth year-over-year.
Churchill Downs Incorporated (NASDAQ:CHDN) has been growing its business presence through B2B strategic partnerships and acquisitions. It expanded pari-mutuel content and technology services to B2C sports betting platforms and also acquired Exacta, which provides HRM technology to third parties and reduces costs for the company.
Investors have shown confidence in management’s strategy to run the company. It was held by 31 hedge funds in Q2 2024, with total stakes worth $673.51 million. Citadel Investment Group is the top shareholder of the company, with total shares worth $166.8 million.
The London Company Mid Cap Strategy stated the following regarding Churchill Downs Incorporated (NASDAQ:CHDN) in its Q2 2024 investor letter:
“Churchill Downs Incorporated (NASDAQ:CHDN) – CHDN outperformed in 2Q as recent results exceeded expectations, and the 150th Kentucky Derby delivered growth above expectations as well. Additionally, in our view the value creation from recent acquisitions is becoming clearer to the market. We continue to view CHDN as a high-quality business run by a management team with a track record of astute capital allocation and a strong pipeline of opportunities for continued growth.
Increased: Churchill Downs (CHDN) – The increase reflects our confidence in the long-term outlook for the business and our desire to reduce cash in the portfolio.”