COVID-19-pandemic-led restrictions proved to be a massive hurdle for the gambling industry last year because physical casinos had to be closed for a major part of the year. However, companies that provide online gambling services were able to generate significant returns. Along with rising demand for online gambling, the reopening of physical casinos on the nation’s fast-paced and effective vaccination drive should buoy the industry’s growth. According to Research and Markets, the global online gambling market is expected to hit $72.02 billion in 2021, growing at a 12.3% CAGR.
Furthermore, New York Governor Andrew Cuomo signed budget legislation on April 19 that includes the framework for New York’s online sports betting plan, making online sports betting legal in New York. With the increasing legalization of gambling across the country, many companies that operate in this space are well positioned to benefit.
Investors’ interest in the gambling space is partly evidenced by Roundhill Sports Betting & iGaming ETF’s (BETZ) 34.8% gains over the past six months compared to the SPDR S&P 500 ETF Trust’s (SPY) 15.3% returns. Given this backdrop, we think it could be wise to bet on fundamentally-sound gambling stocks Scientific Games Corporation (SGMS) and International Game Technology PLC (IGT).
Scientific Games Corporation (SGMS)
SGMS develops technology-based products and services and related content for the gaming, lottery, social and digital gaming industries internationally. The company operates through four segments: Gaming, Lottery, SciPlay and Digital. It offers electronic table systems, instant lottery products, virtual coins, and digital gaming, among other products.
The company today strengthened its global suite of sports technology, services and content with the acquisition of SportCast. The acquisition adds BetBuilder features, underlying technology and quantitative trading models to SGMS’ OpenSports product suite. This could contribute to further growth by the company in the sports betting space.
SGMS’ adjusted EBITDA increased 35% year-over-year to $270 million for its fiscal first quarter, ended March 31. Its operating income came in at $81 million compared to a $32 million operating loss in the prior-year period. Its net loss decreased 146% year-over-year to $9 million. The company’s loss per share decreased 90.5% year-over-year to $0.16.
Analysts expect SGMS’ EPS to be $1.94 in its fiscal year 2022, which represents a 687.9% year-over-year increase. Its revenue is expected to increase 42.2% year-over-year to $766.48 million for the current quarter, ending June 30, 2021. The stock has surged 366.2% over the past year to close yesterday’s trading session at $66.69.
SGMS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SGMS has a B grade for Growth and Quality. We have also graded SGMS for Value, Momentum, Sentiment and Stability. Click here to access all of SGMS’ ratings. SGMS is ranked #8 of 30 stocks in the Entertainment – Casinos/Gambling industry.
International Game Technology PLC (IGT)
Headquartered in London, IGT provides gaming technology products and services worldwide. It operates through two segments: Global Lottery and Global Gaming. The company designs, sells, operates, and leases a suite of point-of-sale machines and provides online lottery transaction processing systems, among others.
On May 24, IGT announced that it has expanded its historical horse racing (HHR) portfolio to include performance-driving Wheel of Fortune-themed games. It is the first licensed theme IGT has introduced into the HHR market. This should increase its revenue in the near-term.
IGT’s revenue increased 25% year-over-year to $1.01 billion for its fiscal first quarter, ended March 31. Its operating income was $260 million compared to a $218 million operating loss in the prior-year period, while its adjusted EBITDA increased 72% year-over-year to $450 million. The company’s EPS was $0.38 compared to a $1.28 loss per share in the year-ago period.
Analysts expect IGT’s EPS to be $0.81 in its fiscal year 2021, which represents a 265.3% year-over-year increase. It surpassed consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 92% year-over-year to $925.85 million for the current quarter, ending June 30. The stock has soared 196% over the past year to close yesterday’s trading session at $23.68.
IGT’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The stock has a B grade for Growth, Value and Quality.
Within the same industry, IGT is ranked #3. To see all the POWR Ratings for IGT (Stability, Momentum and Sentiment), click here.
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SGMS shares were trading at $69.30 per share on Wednesday afternoon, up $2.61 (+3.91%). Year-to-date, SGMS has gained 67.03%, versus a 12.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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