Market Watch: How can gambling shift its "sin stocks" reputation?
RB Capital's Julian Buhagiar on how an investor-led focus on sustainability has hampered gambling stocks despite some impressive Q2 results
The silver lining to being forced indoors when someone in the family is Covid-ised(-ed?-edated?) is to catch up on some oft-deferred work that usually consumes a disproportionate amount of resources. Such as analysing the performance of gaming stocks. And seeing that the Q2 reports for most companies have just been released, it makes for perfect timing too. Anything to avoid watching the Olympics. On the face of it, most gaming companies have certainly had a great half-year, clearly up on revenue and profit across most product lines, across quarters and definitely up on 2020. The future for most also looks bright too, particularly with the gradual opening up of state-side markets. Indeed, it would seem that all parts of the gaming ecosystem (operator, supplier, platform, aggregator) have good longer-term prospects. The stock markets, however, tell a different story. Since publishing their Q2 reports, most of the Nordic gaming stocks are down despite posting increased top- and bottom-line numbers. Apart from Kambi’s nosedive (because of its direct revenue impact from PNG’s acquisition of theScore) most other publicly traded entities have registered single-digit drops when – despite normal rules of physics – they should be up. So, what’s really going on? Part of this sell-off is due to the ongoing Environmental, Social and Governance (ESG) drive across global fund management, in particular Swedish pension funds. Earlier this year, most of the state-backed pension funds came under flack for failing to focus their investments instead on (much-hyped) ESG stocks. While it’s fair to say that the majority of the ESG heat, pun unintentional, is due to fossil-fuel companies, gaming companies have a harder case to prove when it comes to sustainability. Until a clear scientific case (read: financial and also socio-economical) is made proving that properly managed gambling brings about a better, more sustainable society – as, for instance esports is now claiming – these investments will be relegated to that special circle in hell reserved for the so-called sin stocks. So, if you’re intending to quit while you’re ahead, you could pick far worse times than good trading results. And broadly speaking, that seems to have been the trend for the last few days. This sell-off is a short-term blip however, and market prices should stabilise in the coming weeks, as they normally do after half-yearly reports.