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Kramer says wait for industry consolidation before buying online gambling stock

CNBC’s Jim Kramer said Monday that he believes investors should stay away from online sports betting stocks, arguing that owning companies like DraftKings is unattractive because there is too much competition in the gaming industry.

“Until we see fewer ad deals and more M&A deals, these online gambling stocks … are very difficult to own,” said the Mad Money host, noting that this view is in stark contrast to some of the optimism surrounding growing cohort in early 2021.

“But as we see what the reality looks like, there is huge competition for market share and little profit. It’s a shame because profit is what this market wants right now. That is why all these shares were destroyed. “Kramer said, referring to Penn National Gaming, DraftKings and Flutter Entertainment, FanDuel’s parent company.

Other players in this space include Caesars Entertainment, which operates the online sportsbook, and Rush Street Interactive.

Kramer’s comments on Monday came in response to a major milestone on Saturday when mobile sports betting officially became legal in New York, the most populous state in the United States, to date. The first four rate operators to meet regulatory requirements and begin accepting rates were DraftKings, Caesars Sportsbook, Rush Street Interactive and FanDuel

Five more operators are still in the process of meeting all legal requirements, the Associated Press said. Kramer said this is something that investors should consider when examining the impact of a high-profile launch in New York.

“These online gambling companies are throwing money to people to gain market share,” Kramer said, referring to an ad campaign that is taking place in New York. “If the industry is already so competitive with four players, imagine the deals you get when there are nine.”

Another factor to consider is the “astronomical” tax rate of 51% in New York on income that will be levied on online bookmakers, Cramer said.

“Before you can think about buying sports gambling stocks, I think we need to see consolidation. We need to see how some companies are taken out of business, ”he said.

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