Anthony Speciale Stock Market Analyst

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Is Sports Betting A Gamble? (Part 1)

Speaker 1 (00:00):

Hi everyone. I’m Tim Melvin. And thanks for coming back to a better way to wealth. And today we’re going to talk about one of my favorite subjects and that’s sports betting. Now rumor has it that I may have possibly from time to time, once in a great while. Kyle made a bet on a sporting event in my past truth of the matter is, is that, you know, following the map of sports and sports, gambling and odds is fascinating to me. So I spent a lot of time doing some research and playing around with it. But sports gambling is being looked at right now by a lot of states in the United States as a very valuable source of tax and income revenue. Basically it’s a ever since the Supreme court shot down or spending restrictions that were embedded in federal law back in 2018, sports gambling has spread across the United States.

Speaker 1 (00:54):

Pretty much like wildfire, 22 states have already legalized sports gambling, right? Nine states have passed legislation, but not yet implemented all the nuts and bolts of the law. Most states with the exception of Utah are eventually going to allow sports betting either. In-Person everybody seems to want to be doing it online as well as in-person people. Well, love to introduce why get up and go out to the casino. If I can make that bet right here on my phone or my computer so much the better, hello, this is just like cannabis. This is not some big, you know, morality issue from the state’s point of view. This is all

Speaker 2 (01:37):

Happening in any way. The bets are being made,

Speaker 1 (01:41):

Whether it’s legal or not, it’s too easy. It’s, you know, very low rate, you know, to be the customer of a bookie. You’re really not going to get, you know, treated badly by the law. All this gambling is happening in way, so we’re not going to create any gambling addicts, the true gambling addicts, right? They’re there, whether the the gambling is legal or not. So

Speaker 2 (02:02):

It’s a kind

Speaker 1 (02:04):

Of thing where if one state passes it and we saw this with cannabis, if one state passes it, then the states next to it, half the Bassett, or they’re just accept the fact that a lot of their residents are going to go across the state line to make their beds.

Speaker 2 (02:19):

Why not legalize it, keep

Speaker 1 (02:21):

Them at home, collect the tax money for your state. That’s been pretty much the decision that every state down the line has had to make. Yeah, they say that it’s a $210 billion industry globally, and it’s estimated to grow to 8 billion in the night states by 2025. And I’m just going to tell you straight up. I think that those numbers are really low. We won’t know until we get a full transition of sports gambling from eight from the illegal black markets to the legal markets. So that’s going to progress over time. Believe it or not, how a bookie is actually a relationship thing. It’s, you know, for a lot of folks, it’s like having a broker. So it’s kind of like the transition from full service to discount brokers for some people. So it’s going to take off, but I think the market is substantially larger than $8 billion.

Speaker 3 (03:15):

Now, for

Speaker 1 (03:17):

Years, all the leagues had a hands-off policy. When it came to sports gambling, they didn’t want to associate with casinos or anything that’s changing. Okay. They’ve figured out what an incredible revenue source. This is the teams leagues. Everybody’s flocking to partner with the big sports gambling outfits. They’re saying that the Cubs DraftKings relationship alone could be worth as much as $100 million annually. The NBA is looking to partner with all of the sports books. If that’s where their viewers and fans are gonna engage with the league, is that the gambling level, then they’re going to meet them there and engage with them. So some of the money sticks to the NBA’s fingertips. The draft Kane’s already sorry. The NFL already has a partnership with draft Kings. Now, speaking of draft games, this is the 3000 pound gorilla in the room. They’re the most talked about sports and Woodstock.

Speaker 1 (04:13):

They came from being an online fantasy sports, which they still offer a website to being one of the leading sports information and gambling services available in the United States. It’s a great business. They’re capable of the analyst are telling me of annual growth rates in excess of 30% a year. That is vent. Hastick how long they can maintain that. I don’t know, but for the next five years, they’re saying, Hey guys, we think we can grow this company at 30% a year. Great rate. Now here’s the problem right now, they’ve got one and a half million, let’s say monthly customers, and that’s growing pretty rapidly. They’ve got revenue right now. They think they’re going to do a billion dollars this year. Now here’s where the DRA honing DraftKings gets a little complex because it is kind of, you know, it’s an exciting story, great stock, everybody piled into it. When it came public via back merger and drove this thing up to over 70. Now it’s pulled back quite a bit. We’ll touch on that in a second.

Speaker 2 (05:18):

If you take that billion dollars

Speaker 1 (05:19):

And they grow this thing at 30% a year for a decade, 10 years, that’s really hard to do for any business, much less one. That’s going to get as competitive as quickly as sports gambling is going to in the United States. So that gets us to a 13.7, 9 billion in revenue. Here’s the problem folks right now, because the stock is so popular. The market cap of DraftKings is 19.7, $4 billion. So you’re paying a premium to revenues 10 years from

Speaker 2 (05:56):

Now for this company. Draftkings

Speaker 1 (05:58):

Is not popular profitable. They’re not going to be profitable this year. They’re not going to be profitable next year. And I’m a little sketchy on 2023, to be honest with you. So you’ve got you know, no profits insight. They’re going to have to spend to keep up with competition. You’re paying a massive premium to the revenue they’re earning. Now, they’re paying a pretty large premium to the revenue. They’ll be earning a decade from now. If they’re able to grow with 30% a year, that is a dollar task. Now, what do we do then? Do we jump right in? Do we just buy draft gangs? Take the ride with it. Yeah. I don’t know that. We want to do that. If you look at a chart draft Kings, this is a broken momentum stock right now. It got up to 70. We’ve pulled back down into the high forties, as some of the initial folks have taken profits.

Speaker 1 (06:47):

And I think there’s even, maybe been little that nasty shorts selling going on, but here’s the thing. If you really want to take a trade in DraftKings, you can’t once it regains momentum, if it breaks back about 55, you can jump in there and try to surf that stock for a few points, use a very tight stop, stop loss order. And maybe you can pick up a few points if graphing sees momentum and cash flows come back into the stock, but there’s better ways to play sports gambling. I’ve got three ideas that I think will all do better than trying to surf a few points in draft Kings. And tomorrow I’m going to tell you all about them. I’m Tim, Melvin. This has been a better way to wealth, and I’ll see you tomorrow with three ways to profit from sports gambling that I think are better than DraftKings.