Players gonna play: 3 ASX shares set for a strong reporting season

There are some consumer activities that don't just disappear because of an economic downturn. Here are some stocks that could surprise in next month's results.

| More on:
A group of friends watch the game at the pub whilst enjoying a few drinks, one girl has her hand up cheering.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

To combat worries about an economic downturn, it can be productive to try to think of consumer activities that could stay steady through tough times.

One such industry could be gaming and gambling.

Yes, Australians will have less disposable income to spend on such pleasures after multiple monster interest rate hikes. But history shows consumers look for an escape when a struggling economy is getting them down, and some types of gaming don't suffer.

Helpfully, Morgans senior analyst Alexander Mees this week gave his thoughts on the ASX shares in this industry and how they might fare in their August financials.

There were three in particular that his team rated as a buy.

Recession-proof gaming

The coming reporting season will be the first for Lottery Corporation Ltd (ASX: TLC) after its separation from ASX share Tabcorp Holdings Limited (ASX: TAH).

Mees, on a Morgans blog post, forecasts a "steady performance" with earnings before interest, taxation, depreciation and amortisation (EBITDA) up 13% to hit $691 million.

"The larger lotteries division is forecast to deliver all of the growth in earnings (EBITDA up 18%), with Keno EBITDA down 15% after a strong FY21."

According to a Netherlands study, lottery businesses seem to be "recession-proof" compared to other forms of gaming. 

"[Lotteries consumption] is characterised by a vast and solid growth that appears to be independent of the business cycle and of temporary shocks to income," said research authors Csilla Horváth and Richard Paap. 

"During recession the lottery consumption outperforms any other sector in terms of growth."

Mees' team has an add rating for Lottery Corporation shares.

"We forecast 5% growth in EBITDA into FY23."

Another growing lotteries operator

ASX share Jumbo Interactive Ltd (ASX: JIN) is another lotteries provider that Morgans analysts favour at the moment.

Mees is expecting next month's reporting season to show "another year of good growth" for the company.

"We have increased our EBITDA estimate by 3% to $55 million, up 13% y/y with most of the growth driven by the rapidly expanding SaaS [software-as-a-service] division," he said.

"We forecast 24% growth in EBITDA into FY23."

Jumbo Interactive shares have fallen about 17% year to date while paying out a dividend yield of 2.5%.

It seems other professionals agree with Mees. CMC Markets shows five out of seven analysts recommend Jumbo Interactive as a strong buy.

One ASX share for a long-term bet

BlueBet Holdings Ltd (ASX: BBT) is in the field of sports gambling. As such, it's more vulnerable in the short term to an economic slowdown.

But Mees' team finds it attractive for it for its "significant" long-term potential.

"BlueBet's Australian business is forecast to achieve strong growth in turnover in FY22 (48%) as it increases marketing costs to drive customer acquisition," Mees said.

"Those higher marketing costs are likely to reduce EBITDA in Australia to breakeven, with the investment in the US growth strategy pushing group EBITDA to a forecast loss of $1.2 million."

While Morgans analysts have lowered the 2022 gross profit forecast by 4%, BlueBet just signed up its fourth US state.

This ASX share is currently going for a considerable discount compared to just a few months ago. The price has plummeted more than 63% year to date.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended BlueBet Holdings Ltd and Jumbo Interactive Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

A couple in a supermarket laugh as they discuss which fruits and vegetables to buy
Consumer Staples & Discretionary Shares

Why the Woolworths share price now offers a 'very rare opportunity'

Wilson Asset Management is bullish on the outlook for Woolworths shares.

Read more »

A man in a supermarket strikes an unlikely pose while pushing a trolley, lifting both legs sideways off the ground and looking mildly rattled with a wide-mouthed expression.
Consumer Staples & Discretionary Shares

Here's the Coles share price I would buy at

I'd be happy to buy Coles... at the right price.

Read more »

An egg with an unhappy face drawn on it lying on a bed of straw.
Consumer Staples & Discretionary Shares

Bird flu worries send this ASX 200 stock diving 17%

Some investors are jumping away from this stock.

Read more »

A man holds his hands to the sides of his face and pulls it down in despair as he sits at the wheel of a car that is not moving, as though in a traffic jam.
Share Fallers

Why this $3.2 billion ASX 200 stock just crashed 19%

The ASX 200 stock is under heavy selling pressure on Wednesday. But why?

Read more »

JB Hi-Fi staffer helping customer share price
Consumer Staples & Discretionary Shares

2 ASX retail shares just upgraded by brokers (and 1 downgraded)

This broker has picked out the cheap stocks in this sector...

Read more »

A Chinese investor sits in front of his laptop looking pensive and concerned about pandemic lockdowns which may impact ASX 200 iron ore share prices
Mergers & Acquisitions

Star Entertainment share price dives 10% on Hard Rock update

Takeover rumours have been swirling around ASX 200 casino operator Star Entertainment.

Read more »

Cheerful Father And Son Competing In Video Games At Home
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX consumer discretionary shares rose by more than 3% last week.

Read more »

A mature aged man with grey hair and glasses holds a fan of Australian hundred dollar bills up against his mouth and looks skywards with his eyes as though he is thinking what he might do with the cash.
Consumer Staples & Discretionary Shares

Is now the time to buy this high-yielding ASX dividend stock?

This stock could be ripe for an investment.

Read more »