Happy Saturday afternoon to everyone on The Street.

And, welcome back to our new deep dive edition, in which we’ll double-click on a sector, metric, or other investing-related topic we feel isn’t getting the shine it deserves.

Today, that lack of shine makes a modicum of sense. After all, there are no windows in the casino pit…

TOGETHER WITH RYSE

Missed out on Ring and Nest? Don’t let RYSE slip away!

Ring 一 Acquired by Amazon for $1.2B

Nest 一 Acquired by Google for $3.2B

If you missed out on these spectacular early investments in the Smart Home space, here’s your chance to grab hold of the next one.

RYSE is a tech firm poised to dominate the Smart Shades market (growing at an astonishing 55% annually), and their public offering of shares priced at just $1.50 has opened.

They have generated over 20X growth in share price for early shareholders, with significant upside remaining as they just launched in over 100 Best Buy stores.

Retail distribution was the main driver behind the acquisitions of both Ring and Nest, and their exclusive deal with Best Buy puts them in pole position to dominate this burgeoning industry.

Secure your stake before the offer closes.

Gambling’s Gone Mainstream

If you watch sports, listen to podcasts, use public transportation, scroll social media feeds, or, well, exist in America, by now you know:

Gambling has officially gone mainstream.

In 2018, the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA), which banned most states from legalizing sports betting. In the years since, 38 states have embraced the budding industry, advertising has become omnipresent, and Americans have collectively placed hundreds of billions in bets.

Despite a lingering stigma and ongoing risks of addiction and misconduct, the sports betting industry has exploded onto the scene. DraftKings (DKNG), for example, has seen its shares rise by roughly 300% over the past five years.

The primary selling point of these companies is their convenience. A trip to Vegas or even a bookie’s office is no longer a prerequisite to hitting it big. But when a lot of people hit it big, it drains the pot.

This has left many investors wondering: If sports betting is on top of the world, is there anywhere left to go but down?

Losing Streak

In the wake of the 2018 SCOTUS ruling, investing in betting stocks became as much of an adrenaline rush as placing actual bets. Investors were essentially gambling on which states would legalize gambling, and which of these emerging players could survive and thrive in a shifting regulatory environment.

For a moment, it looked like all those bets would pay off big time. Sports betting stocks reached monumental peaks in 2021, as Americans put their pandemic-era stimulus checks to work — via prop bets, parlays, and, of course, retail investing.

But as of today, those fortunes have turned. The Roundhill Sports Betting & iGaming ETF (BETZ) is down more than 5% year-over-year, and nearly 50% from its 2021 peak. Similarly, despite its long-term success, DraftKings is trading well below its 2021 highs.

In the past three months, DraftKings and competitors PENN Entertainment (PENN) and FanDuel-owner Flutter Entertainment (FLUT) have seen double-digit declines, while the larger market climbs to record highs. The downward trend largely stems from a string of weaker-than-expected earnings reports, several betting scandals, and increased state taxes, such as those recently introduced in Illinois.

So, with the market starting to feel a little like a casino floor at 5 AM, is there still room for investors to maneuver? Here’s what analysts are saying.

Sell Me This PENN

According to Schaeffer’s Investment Research Senior Quantitative Analyst Rocky White, DraftKings shorts have reached their lowest level in about three years, while PENN's short interest has remained relatively high since peaking in mid-2020.

Some would say this makes PENN a “buy the dip” candidate. However, White argues that its poor fundamentals and competitive landscape present significant challenges for the stock to regain its former strength.

On the other hand, analysts believe DraftKings has a chance to hold onto the crown. Morgan Stanley’s Stephen Grambling has an Overweight rating on the stock and a $51 price target. (Its price sat just below $39 at close on Friday.)

Grambling expects a capital-allocation announcement from DraftKings this summer, and notes management may reaffirm financial forecasts, reflecting market growth and a stable promotional environment, irrespective of the Illinois tax decision. The lack of similar tax changes in states like New Jersey could further support stock performance.

He’s not the only high roller pushing their chips in on DraftKings. The average price target for the stock is $52, and roughly 4 of 5 major analysts rate it a Buy or the equivalent, per FactSet. Jefferies analyst David Katz included DraftKings in the firm’s top stocks last week, suggesting tax concerns are overblown and EBITDA could double to $1 billion by next year.

TOGETHER WITH RYSE

Missed out on Ring and Nest? Don’t let RYSE slip away!

Ring 一 Acquired by Amazon for $1.2B

Nest 一 Acquired by Google for $3.2B

If you missed out on these spectacular early investments in the Smart Home space, here’s your chance to grab hold of the next one.

RYSE is a tech firm poised to dominate the Smart Shades market (growing at an astonishing 55% annually), and their public offering of shares priced at just $1.50 has opened.

They have generated over 20X growth in share price for early shareholders, with significant upside remaining as they just launched in over 100 Best Buy stores.

Retail distribution was the main driver behind the acquisitions of both Ring and Nest, and their exclusive deal with Best Buy puts them in pole position to dominate this burgeoning industry.

Secure your stake before the offer closes.

Winner Winner, Chicken Dinner

The burgeoning sports betting industry may be on a losing streak, but its luck could still turn around.

Although most states have already embraced it, there remain two high-profile holdouts: Texas and California. Together, these states comprise some 20% of the U.S. population, and could provide the industry with some serious unrealized upside.

Goldman Sachs predicts a surge in U.S. sports betting industry revenue from $10 billion to as high as $45 billion, driven by new state openings and increased spending.

Just because the house always wins doesn’t mean every gambler will. But by playing the odds, you just might hear, “Winner winner, chicken dinner.”