Trading Opportunities for March 19, 2021: Score Media and Gaming (SCR)

People love sports. Just ask ESPN. They make billions of dollars every year selling ads to folks who watch NBA, NFL, and MLB games.

People also love to compete with each other… and they love digital services… and they love to make money (WallStreetBets, anyone?).

So, when the Supreme Court of the United States overturned the Professional and Amateur Sports Protection Act (“PASPA”) in 2018, the stage was set for the emergence of an enormous online gaming and sports betting market.

This enormous market took a big leap forward in 2020, when physical casinos shut down and Americans were forced to gamble and bet on sports online.

In 2020, while slot revenues dropped 34% and table revenues dropped 49%, sports betting revenues rose 69% and iGaming revenues rose almost 200%.

Talk about hypergrowth…

And this industry is just getting started. At a combined $3 billion in revenues in 2020, sports betting and iGaming comprised just 10% of total gaming revenues last year.

Over the next decade, we will see that number grow to 20%, 30%, and higher, as technology virtualizes casinos in the 2020s much as technology virtualized malls in the 2010s.

Online sports betting and iGaming is the future.

It’s a future you want to invest in today… because buying iGaming stocks today, could be like buying e-commerce stocks back in 2010… before they soared by thousands of percent.

The potential returns here will be that big.

Today, we will tell you about one of our favorite plays in this space – a small-cap sports media company that is leveraging its already-established consumer app ecosystem to turn into the de facto mobile sports betting leader.

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From Consumer App, to Mobile Sports Betting Ecosystem

Sports fans are likely familiar with the sports news website and app, theScore. It is the third most visited sports news site in North America – behind ESPN and Yahoo Sports – and the number one most visited sports news site in Canada (ahead of ESPN).

Its parent company, Score Media and Gaming (SCR), just came public on the Nasdaq.

That’s a big deal.

Not because of what theScore is today – digital publishing businesses are in secular decline, thanks to social media sites.

Rather, because of what theScore could be a tomorrow – a mobile sports betting ecosystem with unrivaled reach.

Here’s the story.

theScore app went live in 2007. Over the subsequent decade, the company built a strong digital sports news site that amassed millions of users. But, realizing that the future of digital publishing is bleak, management decided to pivot the business in 2019.

To what? Online sports betting.

The thinking was that theScore has already done the hard work of getting a bunch of users to use its app on a regular basis. That’s the toughest part about building a mobile sports betting app. Getting the distribution to get users to actually download and use the app.

theScore has already done that. Huge advantage.

So, if the company could just integrate online sports betting functionality into that app, then users would be more engaged, more money would flow through the ecosystem, and Score Media would turn into a hypergrowth company at the epicenter of the online sports betting boom.

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Pretty genius idea…

Especially since Score Media has another huge and durable competitive advantage beyond distribution, and that’s data.

The company has collected billions of user interaction data points over the past 13 years. That unrivaled dataset on what sports fans like (and don’t like) gives theScore app a leg-up when it comes to delivering personalized, high-quality sports betting experiences.

Example: If I’ve been using theScore app to follow Gonzaga basketball since 2017 (Go Zags!), then Score Media can personalize a sports betting experience to me so that I can immediately place bets on Gonzaga games.

This personalization is an enormous advantage. Betting on something is so much more fun when you’re personally interested in that “something.”

To that extent, theScore has the fundamental characteristics to build a robust integrated media and gaming platform with enormous potential.

But there were still some legal hurdles. After all, to do online sports betting, you need licenses – and those licenses can be hard to obtain.

So, in 2019, Score Media signed a 20-year deal with gaming giant Penn National Gaming to operate online sportsbooks in 11 states where Penn has casinos or racetracks.

Legal problem solved.

With it solved, Score Media has been busy expanding its gaming operations over the past year. The company launched its first integrated sportsbook in New Jersey in 2019. In 2020, Score expanded sportsbook operations to two more states: Colorado and Indiana. So far this year, theScore Sportsbook has launched in Iowa.

To be sure, the hypergrowth part hasn’t started yet. Although theScore Bet gaming handle rose 535% year-over-year in 1Q21, overall revenue growth was negative due to declines in traditional publishing revenues.

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But that’s a scale thing. The reality is that Score Media has just started on its gaming push – and as this gaming push gains traction and the gaming busines gains momentum in 2021/22, this whole business will turnaround in a big way.

Long-term, you could see theScore app turn into a ubiquity among avid sports gamblers, with fans from all over North America using it to both read sports news and bet on sports events.

Of course, that’s worth a lot more than Score Media’s current $1.3 billion market cap.

So, if you’re bullish on the mobile sports betting megatrend, you should consider taking a position in Score Media and Gaming stock today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

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