Ohio, Profitability Among Investors’ 2023 Concerns Regarding Sports Betting Stocks

Posted on: January 1, 2023, 12:24h. 

Last updated on: January 1, 2023, 02:17h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Today’s long-awaited launch of mobile sports wagering in Ohio and operators’ trek to profitability are among the marquee issues investors will be eyeing in 2023 when it comes to sports betting stocks.

Sports Betting Stocks
The floor of the New York Stock Exchange. 2023 could be a big year for sports betting stocks. (Image: ABC News)

Ohio’s entry into the US sports betting fray is well-timed, because bettors in the state will be able to wager on the Jan. 9 College Football Playoff Championship as well as plenty of NBA, NFL and NHL action.  The Ohio Casino Control Commission (OCCC) on Thursday noted 16 mobile operators and 13 retail sportsbook locations launch today.

With the future of sports betting still murky in California, Texas, and Florida, the addition of Ohio to the live and legal roster is pivotal for gaming companies. That’s because there are 12 million residents in the Buckeye State. By some estimates, handle there could be $8 billion or more in 2023. Based on 2022 numbers, that’d be good for the second spot, behind only New York.

At the state level, operators’ ability to capitalize on launches in Maryland and Massachusetts in cost-effective fashion will also be among the marquee 2023 storylines for sports betting stocks.

Profitability in Focus for Sports Betting Stocks

Sports betting stocks, including pure plays DraftKings (NASDAQ:DKNG) and Rush Street Interactive (NYSE:RSI), slumped mightily in 2022. But on the upside, gaming companies reined in marketing and promotional spending last year.

That puts profitability in reach for some online sportsbook companies. FanDuel, the largest operator in the space, was close to being profitable on an annual basis in 2022, and is likely to get there this year. Similar expectations are in place for BetMGM, Caesars Sportsbook, and Rush Street Interactive, among others, in 2023.

Regarding DraftKings, the most widely followed pure play sports betting stock, the Boston-based company told investors last November it will be profitable on an earnings before interest, taxes, depreciation, and amortization (EBITDA) basis in the fourth quarter of 2023.

If that objective is missed, the operator risks drawing further ire from investors — something it can ill afford following a 2022 tumble of 58.54%.

Fanatics Looms Large

It’s not a matter of “if,” but “when” Fanatics enters the sports wagering space. Currently privately held, the company could force competitors into a new spending battle.

However, a Fanatics sports betting launch in Q1 could disrupt the profitability narrative around DraftKings and other online sports book operators if the promotional intensity is ratcheted up again,” according to Seeking Alpha.

Fanatics is aiming to have its sports wagering unit up and running by January, hoping to be live in various major states by the start of the 2023 football season.

What states those turn out to be remains to be seen. But it appears New York won’t be one. Likewise, how Fanatics enters Nevada, where neither FanDuel nor DraftKings currently operate, has yet to be decided at this point.