Why Sports Betting Stocks Are Down Across The Board

Where Have Sportsbook Stocks Landed Since Their Peak?

DraftKings stock is down to 12.37 per share after peaking at 63.39 per share in 2021.
Caesars stock peaked at 119.49 in 2021 but is now down to just 42.26 per share.
A younger investing audience is rooted as one of the reasons for the stock shares to have dipped.

NEW YORK – The sports betting market, despite thriving on all cylinders, has been proven to not be the successful long-term investment that many investors had hoped.

While share prices for multiple top brands such as DraftKings, Caesars, Flutter Entertainment, and MGM peaked in 2021, they drastically dropped in 2022.

Sportsbook Stocks

Company
Peak
Current

Caesars (CZR)
119.49
42.26

DraftKings (DKNG)
70.65
12.37

Flutter ENT (PDYPY)
117.4
50.9

MGM (MGM)
48.52
30.36

Why The Drop?

The legal sports betting market is different from other public industries in that the product it sells has a lower profit margin. Fans win more often than they lose, leading to sportsbooks seeing lower hold rates in comparison.

New York is the number one sports betting market in the US, with over a billion dollars wagered every month.

In the last week of June, NY sportsbooks saw $218,904,606 wagered on sports. Sportsbooks only retained $15,844,132 in gross gaming revenue, a 7.3% hold rate.

In addition, NY taxes 51 percent on all revenue for online sportsbooks. This means sportsbooks took in less than $8 million combined for that week. While sportsbooks are still profitable, the return rate for markets like produce or retail is much higher.

Are Young Investors To Blame?

Some experts are looking at the actual investors as the reason for the volatile stock prices. When these sportsbooks peaked, many first-time investors jumped to the sports betting market.

Will Hershey, CEO, and co-founder of Roundhill Investments examined the betting investment landscape and summed it up to young, inexperienced investors pulling for a profit.

“I think there was a lot of fast money in those retail stocks,” said Hershey. “A lot of the people who bought in there were just of the belief that a stock doubles every six months. I think the MGM and Caesars shareholder is more sophisticated. After March, people started to move away from the big names that just had high valuations to more of the value companies that had real profits.”

Sports betting stocks were at the top of Robinhood, an investment app targeting younger inexperienced investors. This shows that the younger crowd leaned into sports betting early which could have led to the peak in 2021.

Many of these investors likely sold off their stocks for profit, with younger investors not afraid to buy low and sell high as opposed to long-term investing.

While pinpointing one single reason behind the dip in share prices, sports betting stocks may not hit the peak valuation that they were in 2021.

News tags: BetMGM | Caesars | DKNG | DraftKings | Flutter Entertainment | MGM | New York | PDYPY

Giovanni Shorter

Coming from a background in narrative-based writing, Giovanni strives to write stories that will keep the reader engaged. Although he does pride himself in being accurate, how the story is told is also very important to him. When he’s not keeping readers up to date on sports betting laws and legislation, you can find him writing and recording music, playing videogames, or engaged in heated sports debates with his friends.

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Author: Jeffrey Fisher