The NFL's return could boost sports betting stocks. Here are Wall Street's favorite plays

Published Fri, Sep 10 202110:40 AM EDTUpdated Fri, Sep 10 202110:58 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

The NFL season kicked off Thursday night with Tampa Bay's last-minute win over Dallas, and the matchup could signal the start of another strong stretch for sports betting stocks. Sports gambling has boomed in recent years, as states across the U.S. have legalized online betting. Professional football, as the country's most-popular sport, should help increase user growth and continue pushing the industry toward its potential, according to Wall Street analysts. "iGaming names have rallied during the last month, and we expect this to continue as investors become more comfortable with upcoming revenue estimates given aggressive marketing, superior product and overall better media/betting integration," Macquarie's Chad Beynon said Thursday in a note to clients. "While there will be market share shifts given a growing field of players, we still think the confirmation of a growing [total addressable market] is the most important driver of the group." This fall will mark the first time online gambling has been legal during the NFL season for many states, and companies are competing fiercely to win over new groups of customers. "This NFL season will be the first for MI, TN, VA, WY, AZ, CT, LA, MD, and potentially NY and FL, all of which would drive an oversized growth vs. last year. As well, this will be the first football season post DKNG's conversion to SBTech's platform, the CZR-WMH merger, CHDN's Twinspires rebranding, BALY's Bally Bet and WYNN's participation," Jefferies analyst David Katz said Tuesday in a note. The players in the sports gambling industry are varied, featuring some traditional casino companies and pure-play online options. Each state also has various rules and regulations that can limit how many companies can operate with its borders. The companies have also spent heavily on marketing and acquisitions as a way to gain an advantage on their competitors. Jefferies surveyed gamblers and found that ease of use was growing as a defining quality for these companies. Among U.S. operators, DraftKings scored best on that metric. DraftKings is also well-liked by Wall Street, with buy or overweight ratings from 67% of analysts covering the stock, according to FactSet. That is ahead of MGM Resorts and Penn National Gaming , but behind Caesar's Entertainment , among U.S. sportsbook companies worth at least $10 billion. The chart below shows the Wall Street approval ratings of those stocks and other online betting companies: Outside of the true gaming companies, there are separate tech companies that provide the services and data that help the industry run. One of these is Genius Sports , which has a buy or overweight rating from the five analysts that cover it. On Thursday, Genius Sports announced a partnership with Penn National's Barstool Sportsbook. Investment firm Needham said in a note to clients on Friday that it is bullish on Genius and the industry as a whole ahead of the season. "We continue to find compelling reasons to own all stocks in our coverage in this space - DKNG (Buy, $73), PENN (Buy, $115), GENI (Buy, $29) and RSI ($Buy, 20). And if you do not like our stock picks we like Mac Jones for offensive rookie of the year at +600," the Needham note said. —CNBC's Michael Bloom contributed to this report.

Rob Gronkowski #87 and Tom Brady #12 of the Tampa Bay Buccaneers celebrate after defeating the Kansas City Chiefs in Super Bowl LV at Raymond James Stadium on February 07, 2021 in Tampa, Florida.

Mike Ehrmann | Getty Images

The NFL season kicked off Thursday night with Tampa Bay's last-minute win over Dallas, and the matchup could signal the start of another strong stretch for sports betting stocks.