CNBC’s Jim Cramer said Monday he believes investors should stay away from online sports betting, claiming it was unattractive for their own businesses like Draft kings because there is too much competition in the gaming industry.
“Until we see fewer promotions and more M&A deals, these online sports betting stocks are … very difficult to own,” he said “Bad money” said the host, noting that this view is in stark contrast to something of optimism around the burgeoning cohort in early 2021.
“But when we see what the reality looks like, there is a lot of competition for market share and little profit. What a shame, because profits are what this market wants right now. That’s why every single one of these stocks has been destroyed.” “Said Cramer, referring to people like Penn National Gaming, DraftKings and FanDuel parents Flutter entertainment.
Other players in this area are Caesars Entertainment, which operates an online sports betting company, and Rush Street Interactive.
Cramer’s comments on Monday are in response to a major milestone on Saturday when mobile sports betting was officially legalized in New York, the most populous US state where it did so. The first four bookmakers to meet regulatory requirements and start taking bets were DraftKings, Caesars Sportsbook, Rush Street Interactive, and FanDuel.
Another five operators are still in the process of meeting all legal requirements, Associated Press reported. Cramer said this is something that investors need to consider when examining the impact of New York’s high-profile start.
“These online gambling companies are throwing money at people to gain market share,” Cramer said, referring to the commercial and commercial blitz taking place in New York. “If the industry is already that competitive with four players, imagine the deals you get with nine players.”
Another factor to consider is New York’s “astronomical” 51% tax rate on revenues that online sports betting providers will be subject to, Cramer said.
“Before you can think about buying sports betting stocks, I think we need to see some consolidation. We have to see some companies leave, ”he said.
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