## Gaming Industry Gears Up for Growth: Interest Rates, Sports Betting, and Strong Demand Drive the Sector
The Zacks Gaming industry is on a roll, fueled by a perfect storm of favorable conditions. The Federal Reserve’s recent interest rate cuts are providing a much-needed boost, while the insatiable demand for sports betting continues to propel the industry forward. This dynamic combination is driving increased visitation and spending, particularly among younger demographics, making the gaming industry a prime investment opportunity.
Key Trends Shaping the Gaming Landscape:
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Interest Rate Cuts Offer a Lifeline:
The Federal Reserve’s decision to reduce interest rates by 50 basis points aims to stimulate the economy and support the labor market. This move is a boon to gaming companies who rely heavily on debt for financing operations, expansion, and renovations. Lower borrowing costs free up capital for growth initiatives and reduce interest expenses, creating a positive cycle for industry expansion.*
Macau’s Gaming Revenue Resurgence:
The gaming industry in Macau is witnessing a strong rebound. September saw a 15.5% year-over-year increase in gross gaming revenue, signaling a return to pre-pandemic levels. This resurgence is fueled by robust investments and a strategic focus on improving service quality and staffing levels to cater to the evolving needs of gamers.*
US Commercial Gaming Revenue Hits New Highs:
The American Gaming Association reports record-breaking gambling revenue of $17.63 billion in the second quarter of 2024, representing an 8.9% year-over-year increase. This marks the 14th consecutive quarter of annual revenue growth, highlighting the continued strength and resilience of the US gaming industry.*
Sports Betting: A Major Growth Engine:
The legalization of sports betting across various US states, including Delaware, Mississippi, New Jersey, Pennsylvania, and more, is driving significant growth. Bettors can now place wagers conveniently through digital platforms, leading to a surge in online gaming activity. Popular gaming applications like DraftKings, FanDuel, BetMGM, and BetRivers are at the forefront of this trend.Zacks Industry Rank Signals Bright Prospects:
The Zacks Gaming industry, grouped under the Zacks Consumer Discretionary sector, holds a Zacks Industry Rank #103, positioning it within the top 41% of over 250 Zacks industries. This ranking reflects the industry’s positive near-term outlook, driven by a collective positive earnings forecast for its constituent companies. Analysts are becoming increasingly confident in the industry’s earnings growth potential, as evidenced by upward revisions to earnings estimates.
Investing in the Gaming Boom:
While the industry has outperformed the broader market and its sector in the past year, it’s crucial to understand its valuation. The Zacks Gaming industry’s forward 12-month EV/EBITDA ratio currently sits at 11.93, indicating a slight discount compared to the broader market. This provides a compelling entry point for investors looking to capitalize on the industry’s growth trajectory.
3 Gaming Stocks to Watch:
1.
Flutter Entertainment (FLUT):
This Zacks Rank #1 (Strong Buy) company is experiencing strong growth across its brands in the UK, demonstrating market share gains for 10 consecutive quarters. Flutter Entertainment’s migration of FanDuel Casino to its proprietary technology enhances platform stability and offers exclusive content. Earnings estimates for 2024 have risen significantly, indicating a positive outlook.2.
DoubleDown Interactive (DDI):
The company’s robust social casino business continues to drive growth, with revenue increasing for three consecutive quarters. This Zacks Rank #1 player’s shares have experienced impressive gains in recent months. Earnings estimates for 2024 have also seen substantial upward revisions.3.
GDEV (GDEV):
GDEV’s commitment to sustainable growth and operational efficiency, coupled with its focus on delivering top-notch games and attracting top talent, positions it for long-term success. Shares have witnessed remarkable growth, and earnings estimates for 2024 have surged, highlighting the company’s strong potential.The gaming industry is in a strong position to capitalize on the prevailing macroeconomic trends and the growing appetite for gaming entertainment. With its bright outlook, attractive valuation, and a selection of top-performing stocks, the Zacks Gaming industry offers compelling investment opportunities for savvy investors.
