2021 Expected to See Opportunities Climb for Online Gambling Stocks

2021 Expected to See Opportunities Climb for Online Gambling Stocks

PR Newswire

NEW YORK, Dec. 31, 2020

FN Media Group Presents Microsmallcap.com Market Commentary

NEW YORK, Dec. 31, 2020 /PRNewswire/ -- Gathering restrictions have hit casinos hard in 2020, including in Atlantic City, where the city's nine casino operators reported a $89 million drop in profits during Q3 2020. According to data from New Jersey gaming regulators, the jurisdiction is embracing online gaming to help offset the tax revenue losses from these land-based casinos. Atlantic City isn't alone in this shift, as several legal gambling districts are looking to online gambling service providers to provide secure, smooth, and fun transitions into the digital area, including from Bragg Gaming Group (TSXV: BRAG) (OTCQX: BRGGF), Boyd Gaming (NYSE: BYD), Landcadia Holdings II (NASDAQ: LCA), Caesars Entertainment (NASDAQ: CZR), and GAN Limited (NASDAQ: GAN).

In Germany, where new regulation on online gambling will enter into force in July 2021, Bragg Gaming Group (TSXV:BRAG) (OTC:BRGGF) has enhanced its position in the German market through a new partnership with Greentube-owned brand StarGames to provide content through Bragg's wholly-owned subsidiary ORYX Gaming.

Through the deal, Bragg/ORYX has not only solidified its position in the German market, but will also further expand its EU footprint. ORYX is licensed by the Malta Gaming Authority (MGA) and is currently compliant, certified, or approved in 18 other major jurisdictions, including Schleswig-Holstein (Germany).

The StarGames announcement comes on the heels of a series of Bragg's deals involving EU markets (including Nordic markets, and Switzerland). It's been a year of positive momentum for  Bragg Gaming Group, which recently announced an exceptional revenue growth of 72% in Q3 2020. By continuing to focus on expanding its market presence, the company onboarded 14 new customers in the third quarter alone.

Earlier in December, Bragg/ORYX signed on with international operator Paf to provide exclusive Remote Games Server (RGS) content across several regulated markets and brands, including Paf's online casinos in Sweden, Estonia, Spain, Latvia, and its home nation of Finland.

Turnover for the Paf Group in 2019 amounted to €114.2 million (more than US$139 million). Earlier this year, Paf was named Sweden's most sustainable gaming company at the annual Swedish Gambling Awards. Paf's generated profits are used to benefit the society every year.

The benefits from tax revenues generated from gaming are undeniable. However, COVID-related restrictions are indeed hurting this revenue source, as witnessed by the 33% decline in November in Massachusetts where curfews were enacted.

States are stepping up their efforts to make up revenues in this field, as the casino industry's national trade group, the American Gaming Association, acknowledges that 44 states plus Washington, D.C., have now legalized some form of casino gaming, including sports betting. Even to the north in Canada, attitudes are shifting on sports betting, in particular single-event wagers, for which Bragg Gaming Group recently spoke out to support.

Groups such as Bragg and GAN Limited (NASDAQ:GAN) help to facilitate gaming institutions by providing RGS services, which help to securely publish and distribute content across social and real-money gaming channels around the world.

During his company's Q3 2020 Financial Report call, GAN CEO Dermot Smurfit spoke about his company's "Super RGS" for content delivery in New Jersey and Pennsylvania, as well as preparing for a launch in Michigan as well.

"The significance of the Super RGS is that it will permit internet gambling companies who are operating on a proprietary or competing third-party platform [to integrate] GAN Super RGS and launch our entire games portfolio on their website and mobile apps," said Smurfit on the call. "This creates a technical and commercial vehicle for GAN to deliver its casino content across the entirety [of] the relevant US intra-state markets and not just onto our platform client's websites and mobile apps."

Not stopping at just the North American market, GAN recently made a splash by buying one of the fastest-growing iGaming and sportsbook operators in Europe, Coolbetfor $175 million.

As large as the Coolbet deal was, it was the $3.9 billion deal whereby Caesars Entertainment, Inc. (NASDAQ:CZR) acquired British sportsbook experts William Hill that may have created a bigger splash. After much criticism for its cold feet, it appears that Caesars is finally beginning to take online gambling seriously. Costly as the deal was, it was a risk that the resort owner felt it needed to take.

"We're looking at different activities and bolt-on acquisitions. This (William Hill's European business) can definitely fall under that category," Caesar's CEO Itai Pazner told Reuters.

Since the lows observed in March, Boyd Gaming (NYSE:BYD) has seen its shares surge 200%. Primarily, those lows were due to working out the strategic arrangements of its deal with FanDuel for sports betting and online gaming platforms.

Overall, the US online gaming and sports betting market is expected to reach a staggering $40 billion, which Boyd was wise to get ahead on through the FanDuel deal. However, after a subsequent deal with Flutter Entertainment was struck later in the year, Boyd Gaming is only retaining 5% ownership of FanDuel moving forward—perhaps leaving Boyd with less of the reward should the FanDuel valuation reach new heights.

It now appears that Landcadia Holdings II (NASDAQ:LCA) and their shareholders are in the final stages of a reverse merger with Golden Nugget Online Gaming, Inc.

Weeks prior, the New Jersey Casino Control Commission (CCC) approved a license for the proposed merger entity, making the new Golden Nugget Online Gaming (GNOG) brand a publicly traded entity. Already, GNOG has said it's entering into an agreement to access the West Virginia market, and will later enter Michigan and Pennsylvania next year.

Upon its Nasdaq debut, GNOG will become the second pure-play online gaming company in the US, joining DraftKings in that distinction.

With its ongoing success in the European gambling market, Bragg Gaming Group has the potential to start seeing opportunities to expand overseas and become another strong contender in the US market.

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