3 Must-Buy Gaming Stocks to Thrive on Promising Market Trends – Flutter Entertainment (NYSE:FLUT), DoubleDown Interactive (NASDAQ:DDI)

The Zacks Gaming industry stands at the crossroads of economic shifts, propelled by the Federal Reserve’s interest rate adjustments and a burgeoning appetite for sports betting. Current indicators signal an upward trajectory as heightened footfall and increased spending per visit, predominantly by the younger populace, breathe fresh vigor into the sector. Key players like Flutter Entertainment plc, DoubleDown Interactive Co., Ltd., and GDEV Inc. are poised to harness this wave of enthusiasm.

The Zacks Gaming industry comprises entities engaged in managing and operating integrated casinos, hotels, and entertainment hubs. Beyond these conventional domains, industry stalwarts are diversifying into technology offerings spanning lotteries, electronic gaming machines, sports betting, and interactive gaming. The sector also encompasses niche verticals like e-sports and event services, content management systems, and mobile applications.

Interest Rate Cut Spurring Industry Momentum: The recent interest rate slash by the Federal Reserve aims to invigorate economic activity and fortify the labor market. Gaming companies, typically reliant on borrowing for operational and expansion needs, are set to gain from reduced interest expenses and favorable refinancing options amidst the current financial landscape.

Revival in Macau Gaming Revenues: Macau’s gaming revenues soared by 15.5% year over year in September, signaling a resurgence in visitor numbers. Industry players are adopting strategic measures to enhance operational efficiency and service quality, beckoning a promising outlook for the sector.

Resilient U.S. Commercial Gaming Sector: The robust performance of the U.S. gaming industry, as evidenced by record-high revenues in the second quarter of 2024, underscores its enduring appeal among investors. Continued revenue growth over 14 consecutive quarters advocates a stable and upward trajectory for the segment.

Sports Betting as a Propellant: The legalization of sports betting in a bouquet of states has been a game-changer, propelling the growth trajectory of the industry. Digital betting platforms and a flourishing array of gaming applications have catalyzed this trajectory, promising heightened engagement from gaming enthusiasts across demographics.

The Zacks Gaming industry’s placement within the broader Zacks Consumer Discretionary sector, represented by a Zacks Industry Rank of #103, signals a bright outlook. Historic trends highlight that industries ranked in the top echelons of Zacks rankings tend to outperform their lower-ranked counterparts, accentuating a promising path for the gaming segment.

While the industry has historically lagged behind the S&P 500 Index and the broader Consumer Discretionary sector, the recent past has witnessed an upsurge in the sector’s performance. A rise of 27.4% over the last year underscores a glimmer of recovery, albeit outpaced by broader market indices.

Assessing the valuation metrics through the EV/EBITDA lens, the gaming sector’s current forward 12-month ratio stands at 11.93. Positioned at a discount compared to the broader market, this favorable metric reflects the industry’s potential for growth and investment. Over the last five years, the EV/EBITDA ratio has oscillated between highs and lows, underscoring a dynamic valuation landscape.

Flutter Entertainment: With significant market share gains in the U.K., coupled with a robust technology migration strategy, Flutter Entertainment presents a compelling investment case. A Zacks Rank #1 and a solid earnings outlook bolster its standing in the market.

DoubleDown Interactive: Riding the wave of social casino business growth, DoubleDown Interactive boasts a Zacks Rank #1. A steady revenue uptick underpins its market appeal, accentuated by a favorable earnings outlook for 2024.

GDEV: Grounded in a vision of sustainable growth and operational excellence, GDEV heralds a promising era in the gaming domain. Bolstered by steady earnings revisions and a surge in share value, this Zacks Rank #1 player is positioned for success in 2024.