A combination of poor performance on October NFL bets, New York taxes on sports books and investors getting defensive spurred a broad sell-off in sports stocks in November, hammering the JohnWallStreet Sports Stock Index to its worst monthly performance to date.
The benchmark Sportico index closed November at 1,559.57, its lowest level since February and down more than 230 points from its peak in March. The 9.5% decline in the month is the biggest drop the sports sector has seen since the index was reconstituted at 1,000, as an equal-weighted barometer in August 2020. Sports stocks still have gained 10% in 2021, but now lag the S&P 500’s 22% advance on the year, after beating the broad market for much of the past 11 months.
Of the 40 stocks in the index, 33 fell in November, led by steep drops in all the sports betting-related stocks. Sports books didn’t do well with October’s NFL bets, something equity analysts asked in earnings calls with multiple companies the past month, while enthusiasm generated by New York opening the state up to mobile sports betting was largely drained by plans to tax sports wagers at 51%. Signs of rising costs to acquire bettors’ business and a market-wide spurning of growth stocks on inflation and pandemic fears added to the selling sentiment, according to analysts.
Falling the most was sports data and analytics firm Genius Sports (Nasdaq: GENI), which surrendered almost half its value, some $1.8 billion in market capitalization, in part because management projected higher costs for the coming year during an otherwise positive third quarter earnings call. Genius competitor Sportradar (Nasdaq: SRAD) fell 23% in the month despite having similarly good quarterly results, while DraftKings (Nasdaq: DKNG) had 26% lopped off its shares, representing $6 billion in market cap lost in November. Sports-centric streaming service FuboTV (NYSE: FUBO) surrendered 34% in the month, driven down by sports betting bears after benefitting from gambling bulls earlier this summer on its own betting service plans. Penn National Gaming (Nasdaq: PENN) was also among the worst performers, losing more than 28%, or $4 billion in market value, sparked by poor earnings results and reputational risk associated with a disquieting story about Barstool Sports founder Dave Portnoy’s sexual encounters. Overall, 16 companies in the JohnWallStreet Sports Stock Index fell more than 10% in the month.
The handful of sports stocks advancing in November were led by Dover Motorsports (NYSE: DVD), whose primary business is ownership of two Nascar tracks—one in Delaware, the other in Tennessee. The company is being purchased for $131.5 million by International Speedway, the O. Burton Smith-owned operator of nine Nascar racetracks across the U.S. Dover was up 62% in November, matching the premium Burton offered to its share price. The deal is expected to close this month, and Dover will no longer be publicly traded. Formula One (Nasdaq: FWONA), up 11%; UFC parent Endeavor Holdings (NYSE: EDR), up 5%; and Under Armour (NYSE: UAA), up 7% on perceived strong retail sales, were other notable gainers in the month.
The JohnWallStreet Sports Stock Index is a 40-stock grouping meant to reflect the state of professional sports. The index began August 2020 at 1,000 and is rebalanced quarterly, meaning each stock is reset to 2.5% weighting. To be included in the Sportico index, stocks must be traded in sufficient volume on a U.S. exchange and have a minimum market cap of $50 million. Companies that fail to meet the requirements, experience a significant corporate event (think: bankruptcy, sale) or pivot in strategy away from professional sports may be dropped from the index.