For a gambling stock to come out against problem gambling is an interesting condition. On the one hand, it pretty much reduces cash flow. On the other hand, failing to do so potentially sets you up to be compared to some kind of monster that destroys lives. Several gambling stocks today took the first horn of that dilemma, and shareholders, for the most part, aren’t happy.
While MGM Resorts (NYSE:MGM) is only down fractionally, Flutter Entertainment (NYSE:FLUT) is down nearly 7%. DraftKings (NASDAQ:DKNG) took it even harder, down nearly 8%. The only one to buck the trend was Penn National Gaming (NASDAQ:PENN), up fractionally in Wednesday morning’s trading.
Those four gaming operations, along with Hard Rock Digital, bet365, and Fanatics Betting and Gaming, all got together to form ROGA, the Responsible Online Gaming Association. With these seven together, that represents just over 85% of all legal online gambling in the United States, which is a significant market force.
They’ve also put their money where their mouths are by pouring over $20 million to fund the operation. That $20 million will go toward educational programs, advertising and marketing initiatives, and establishing an “independent clearinghouse” of data for consumer protection.
DraftKings Deliberately Limits Itself
DraftKings’ recent operations detail how puzzling this sort of setup can be. On March 8, it announced that it had moved into the North Carolina gaming market, which gave it access to a huge new market. It also declared that it would operate according to “responsible gambling protocols,” including things like deposit limits. Meanwhile, just over two weeks later, it declared it would make available a problem gambling program in connection with Kindbridge Behavioral Health. Essentially, it’s deliberately setting limits on itself.
That might seem counterintuitive—why would you not want to sell every bit of a product or service you can?—until you consider the potential value of restraint and the ability to keep customers coming back as opposed to taking everything they have, ruining their lives, and then being blamed for it later. The phrase “plausible deniability” comes to mind here.
Which Gambling Stocks Are a Good Buy Right Now?
Turning to Wall Street, PENN stock is the clear leader right now. With an average price target of $26.07, this Moderate Buy-rated stock offers investors a 45.68% upside potential. Meanwhile, with an upside potential of just 13.42%, Strong Buy-rated DKNG stock and its $50.93 average price target comes in as the laggard.
