Could this ASX sports wagering stock be recession proof?
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If history is anything to go by, RAS Technology (ASX:RTH) is one stock that should weather the current unsettled economic conditions well.
The Canberra-based business might not be considered a household name, but it has, over 23 years, established itself as one of the leading providers of premium data, enhanced content, and SaaS solutions to the global racing and wagering industries.
It drives the offerings of Tabcorp, Ladbrokes, Bet365, Sportsbet, Betfair and BlueBet and is backed by Entain, one of the world’s largest sports-betting and gaming groups and the owner of Ladbrokes, which invested at the RAS Tech’s IPO and has a cornerstone shareholding of 10.3%.
The last time recession began to rear its ugly head, post the 2008 GFC, RAS Tech’s revenue shot up 30%. Two years later it was 23% higher. In 2021, the year the company listed on the ASX, it was up 55%.
And this year, following a series of major partnerships and contracts and the company’s rapid entry into the US and European markets, RAS Tech expects to remain on that trajectory.
Last month Jason Robins, CEO of US based sports betting and gaming giant Draft Kings said rising inflation had had zero impact on his business and the broader sector.
“Gaming has generally been very well-performing during economic downturns, recessions, inflationary periods, and the like,” he said.
“This is not a new thing. This is something that’s been well-known about the industry for quite some time. And we’re certainly seeing the same thing materialize in our numbers.”
As Robins says, this isn’t a new thing and he isn’t alone in noting the sector’s resilience in tough times.
Macquarie Analyst Chad Beynon told Yahoo Finance during the last downturn, the global gaming and gambling sector held up well and he believes that will be the case this time too in particular because of the erupting US sports wagering market.
This US play is where RAS Tech comes into its own. The company provides the proverbial picks and shovels to the gaming sector: the all-important data to all the big sports wagering companies so it benefits from the burgeoning US market without the risks involved with large capital investment for licences. Plus, they have long, existing relationships with many of the US players through their years of supplying thoroughbred racing data.
It’s also insulated from the astronomic cost of customer acquisition, which is crushing the opportunity for many Australian sports wagering companies before they even begin to crack the market, not to mention the impact of soaring cost-of-living on a highly consumer discretionary sector.
Earlier this year, JP Morgan warned about the high customer acquisition costs in the US but remained bullish on the sector overall estimating it could be worth $US13.5 billion by 2025.
This article was developed in collaboration with RAS Technology, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.