ADOBE/MARIO PAULS/LORENZO GORDON

The regional sports network model failed for Sinclair Broadcast Group (SBGI), with a nearly $10 billion investment by the company evaporating in less than four years. But in proof of the adage Wall Street is always looking forward, not backward, the company’s shares are surging, driven in part by enthusiasm over strides the company has made in distribution of its Tennis Channel and sister network T2.

With a 30% gain last month, Sinclair stock led all components of the Sportico Sports Stock Index. Overall, the index, which tracks 40 U.S.-traded stocks to gauge the state of the sports business, barely moved in April, closing down one point to finish at 1,165. While that lags the 1.5% gain of the S&P 500 Index last month, sports stocks are still up 11% in 2023, besting the 9% gain of the broader market index.

Sinclair, which operates 185 television stations in 85 U.S. markets, bottomed out shortly after the bankruptcy filing by its nearly wholly owned Diamond Sports Group in March. In a draft settlement with its creditors, Sinclair agreed that a restructuring will completely wipe out its equity in the RSN. But since then, shares have been on a tear, rising from a low of $12.64 on March 17 to $19.89 Friday.

The surge is partially because the bankruptcy allowed Sinclair to wash its hands of $8 billion in debt used to build its erstwhile Bally’s Sports empire. It’s also in part from an announcement early last month that YouTube TV will start carrying Sinclair’s two tennis networks starting June 1. Costs of running the tennis offerings are actually higher this year than last, but the Street seems to be agreeing with management’s pitch that its tennis channels will be long-term drivers of growth.

“You won’t see a financial benefit in tennis in 2023,” Sinclair CEO Christopher Ripley told analysts in February. “A lot of those initiatives are still in investment mode, but we’re very bullish about tennis in the future as [our reach] expands globally.”

DraftKings (DKNG) posted the index’ second-best performance in April, rising 25%, which indicates bears are starting to tire of clawing down sports betting stocks. Most other sports-wagering stocks gained in the month, too, including Churchill Downs (CHDN, up 19%), increasingly a betting business while holding onto its legacy Kentucky Derby race. It also will affect a two-for-one stock split this month. Other wagering-related gainers include Barstool Sports parent Penn National Gaming (PENN, up 7%), Sportradar (SRAD, up 6%), Caesars Entertainment (CZR, up 4%) and Rush Street Interactive (RSI, up 3%). Even Betway parent Super Group (SGHC), which was the second-worst performer with a 10% share drop in April, enters May still up 20% on the year. 

“Investor sentiment for online gambling stocks (and the market in general) went from euphoric in 2021 to overly bearish in 2022 with now increasing optimism again,”  Craig-Hallum Capital equity analyst Ryan Sigdahl said in an email. “Investors want growth and profitability, and there is gradually improving confidence in that from the scaled and differentiated B2C operators and the few critical B2B suppliers.”

Still, there remains a lot of bearish overhang in sports betting shares—even DraftKings, consistently the best-performing U.S.-traded sports-gambling stock, is still just about one-third the price it fetched in the stock market two years ago. But expectations are that the growing market for U.S. sports wagering will provide better economies of scale and also feed into more lucrative online casino games.

“There’s a reason that the sportsbooks are in the back of the casino, and not in the front with the slot machines,” venture capital investor Paul Martino of Bullpen Capital said in a phone call. “In the big scheme of things, sports betting is a lower margin business then casino. … Lifetime values [of a customer] are far higher when I have casino games available.” Right now, only six states have both online sports betting and online casino—igaming—permitted.

That symbiotic relationship between sports and casino games may be a reason why the parent of one of Martino’s early investments, FanDuel, elected to pursue a U.S. stock listing. Last week Flutter Entertainment, an Irish company that has long specialized in sports betting and casino games in Europe and Australia, passed a shareholder resolution to dual list its shares in New York, in addition to its current London Stock Exchange listing. Flutter shares have doubled the past year in London, but see trading volume well below competitor DraftKings. In addition to FanDuel, Flutter owns the brands Paddy Power and Pokerstars, among others.

Flutter likely will join the Sportico Sports Stock Index in its next rebalancing at the end of June. As an equal-weighted index, every stock is reset to 2.5% of the total four times a year. Right now, the index has 41 components, thanks to Madison Square Garden Entertainment (MSGE) spinning off Sphere Entertainment Co. (SPHR, up 10%) mid-month. MSG Entertainment split its RSN and most of its venue businesses from the operation that is building the Sphere, a 20,000-person entertainment venue in Las Vegas. For those charting stocks at home, the business now known as Sphere retains the historic price history of MSGE, while the reformed MSG Entertainment is considered a new business as far as its trading history. MSG also sold its high-end restaurant arm, Tao Hospitality, for $550 million last month to help fund the multi-billion-dollar cost of the Sphere.

Fifteen of the sports index’ components fell in April, led by the continued downward spiral of esports’ FaZe Clan (FAZE) which tumbled another 22% to close Friday at 48 cents. Faze is down 98% from its all-time high in August, and things are so bad even Snoop Dogg left the building. Activision (ATVI) gapped downward to post a 8% loss on the month after its acquisition by Microsoft was blocked by a UK regulator. Manchester United (MANU) also eased 11% in the month as its potential sale has entered a third round of bidding.

The Sportico Sports Stock Index debuted at 1,000 at start of August 2020.