We recently compiled a list of the 10 Best Casino Stocks To Buy According to Analysts. In this article, we are going to take a look at where Gambling.com Group Limited (NASDAQ:GAMB) stands against the other casino stocks.
A Quick Recap of the Global Gambling Industry
The world has seen a rapid growth in online gambling recently, which is fueled by the legalization of sports betting around in many countries. The United States ban on sports betting was lifted in 2018 since then many states have moved to allow such activities online as well.
Makers of FanDuel and BetMGM have flooded the United States market with promotional content and advertising targeted at sports fans, encouraging them to participate in their fantasy leagues. Sports betting companies use various marketing techniques to cash in the sports seasons. In one of the BetMGM promotions, its brand ambassador Jamie Foxx, a movie star, encouraged sports fans to try betting on various outcomes in the game.
The advertisements have been working well to drive revenue for the companies. As per the American Gaming Association, in 2023, online sports bookmakers took more than $114 billion in Bets. Moreover, the US revenue from online sports betting reached around $16.9 billion during the same year.
After the United States, many other countries are working on building casinos to attract foreign tourism. As per a CNBC report on September 1, Thailand after Singapore and Macau is looking to develop casinos in the country. The strategy worked well for Macau as it overtook the title of the world’s largest gambling hub from Las Vegas. Singapore has been reaping the benefits as well from its two 14-year-old casinos. Thailand has now joined the race, and it is expected that the country will give tough competition to both Macau and Singapore. Its casinos are expected to generate $5 billion in revenue, which is 1% of the country’s GDP.
In one of our recent articles titled, 7 Best Small-Cap Casino Stocks Hedge Funds Are Buying, we found that Asia Pacific is one of the major contributors to the global betting industry. Here’s an excerpt from the piece:
“Legalization of gambling, rapid urbanization, increased use of social media, and rising internet penetration rate are factors driving market growth. As per the report, the Asia Pacific region is the main contributor in the global betting industry accounting for more than 32.4% of the total market valuation. The Asia Pacific region is followed by North America and Europe. Looking ahead, South America and Africa are expected to be the next hot markets for gambling and casino companies. The South American region is expected to grow at a CAGR of 23.4%, whereas Africa is expected to grow at 8%. Rapid legalization and increasing disposable income in these regions contribute to the growth.
If we look at the segment-wise analysis, the lotteries segment accounts for more than 53% of the total market value and is expected to grow at the fastest rate during the forecasted period.”
Are Sports Betting Stocks Slipping Due to the Upcoming Tax?
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. Meaning 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 waggered 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 shit to the consumers.
Now that we have looked at the overall gambling and casino industry. Let’s talk about the 10 best casino stocks to buy according to analysts.
Our Methodology
We used the Finviz stock screener to come up with stocks operating in the gambling and casino industry. First, we aggregated a list of casino stocks that were most widely held by hedge funds in Q2 2024. Next, we ranked them based on the average price target upside as per Wall Street analysts. The list is ranked in ascending order of the average price target upside as of September 1.
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).
A wide shot of a casino in night light, picturing the high stakes of iGaming and sports betting.
Gambling.com Group Limited (NASDAQ:GAMB)
Average Price Target Upside as of September 1: 37.39%
Number of Hedge Fund Holders: 11
Gambling.com Group Limited (NASDAQ:GAMB) is a digital marketing services company that publishes content about the gambling industry. The company helps large companies like DraftKings get customers through the content it publishes and gets a cut for each deposit. It publishes content through more than 50 websites, all of which are well known.
Gambling.com Group Limited (NASDAQ:GAMB) was held by 11 hedge funds in Q2 2024, with total stakes worth $21.6 million. G2 Investment Partners Management is the top shareholder with a position worth $6.67 million.
The company leverages its strong market presence to drive record revenues each quarter. It delivered more than 108,000 new depositing customers during the second quarter of 2024, presenting a 19% increase year-over-year. Gambling.com Group Limited (NASDAQ:GAMB) also benefits from the sports betting seasons and demonstrated strong growth in the US.
The financial performance of the company was ahead of expectations, its revenue rose 18% year-over-year to a record 30.5 million. Europe proved to be the most successful market for the company as the iGaming revenue from Europe grew 111% year-over-year. Its overall international revenues were also a success and improved by 70% during the same time.
Management has been effectively cutting costs and improving profit margins, during the second quarter, the company’s gross profits were up 16%, whereas operating expenses decreased 15% year-over-year.
Gambling.com Group Limited (NASDAQ:GAMB) has raised its 2024 guidance and now expects revenue of $123 million to $127 million, representing 15% and 24% increment year-over-year.
GAMB is cheap at current levels, it is trading at 13 times its forward earnings, a 4% discount to its sector. Moreover, its earnings are expected to grow by 68% during the year to reach $0.79.
7 analysts have a Strong Buy rating on the stock, with their 12-month median price target of $14 presenting a 37% upside from current levels.
ClearBridge Small Cap Value Strategy made the following comment about Gambling.com Group Limited (NASDAQ:GAMB) in its Q3 2023 investor letter:
“In the communication services sector, Gambling.com Group Limited (NASDAQ:GAMB) was our top individual performer. A leading provider of digital marketing services to the global online gambling industry, the company saw its stock price rise after announcing second-quarter earnings that exceeded analysts’ expectations and raising its full-year guidance, and as the football sports betting season began. Gambling.com has rapidly reached profitability in its North America lead-generation business for sports betting sites, which continues to offer compelling growth opportunities as more U.S. states legalize online gambling, while its mature European business continues to see growth from improved search engine optimization. Ultimately, we believe the company’s low marketing and capital expenditures, combined with the attractive opportunities from growth in online sports wagers, will make Gambling.com a strong long-term compounder for the portfolio.”
Overall GAMB ranks 6th on our list of the best casino stocks to buy. While we acknowledge the potential of GAMB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
