This Gambling Stock Is a Better Buy Than DraftKings – Motley Fool

December 13, 2021 by No Comments

When the online gambling market exploded in 2020 because of the pandemic, stocks like DraftKings (NASDAQ:DKNG) benefited most, and for good reason. The company’s revenue jumped, investors in growth stocks saw a multidecade growth trajectory, and DraftKings made moves to potentially dominate the market. 

As online gambling has slowed in 2021, stocks like DraftKings have suffered. To make matters worse, huge marketing deals signed in the past year could lead to financial losses for many years to come. While DraftKings is down and trading near 52-week lows, there’s an online gambling stock that’s potentially starting to gain traction in the market, and it’s a great value for investors today. That company is GAN Limited (NASDAQ:GAN)

Image source: Getty Images.

Consolidating online gambling looks difficult

One of the questions facing the online gambling industry was whether there would be a few companies that would consolidate market share and build a vertically integrated business, where a single company would build the scale to develop all of its own solutions, or if the industry would fragment and specialize. This would likely lead to horizontal integration, or specializing in a small subset of the market so that a company can serve as many customers as possible.

DraftKings seemed the most likely to grow fast enough to capture enough market share to vertically integrate, but that’s been more difficult than investors might have hoped. You can see below that DraftKings is burning cash at an unsustainable pace as it tries to grow revenue and take market share. 

DKNG Revenue (TTM) data by YCharts

In the meantime, MGM Resorts says it’s capturing market share from DraftKings, and it has a cash-generating casino business to fund online gambling growth.

If competition leads to many players with a share of the market, it may make more sense for companies to specialize, and that’s where GAN Limited could benefit. 

Consolidation may not be the answer

GAN Limited has a technology stack called GameSTACK that online gambling companies can tap into. This brings services like payment services, geolocation, analytics, and account management to customers in a turnkey fashion, which means GAN can serve a lot of customers with any of its software solutions.

This software can be used a la carte as well, with some customers choosing to use just a few pieces of the technology stack. GAN Limited has worked with DraftKings, FanDuel, and even Penn National to get these companies to market quickly. 




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