Sports Betting Is Booming Worldwide. Is This DraftKings Competitor Worth the Risk While Its Shares Are Under $8?

They say "the house always wins," but sports-betting stocks haven't exactly fared well thus far in 2025. Sportsbook pure plays such as DraftKings and Flutter Entertainment have both struggled in the market lately.

A key headwind has been the rise of prediction market platforms like Kalshi, which threaten the traditional sportsbook model.

Image source: Getty Images.

For another U.S.-listed sportsbook operator, Codere Online Luxembourg (NASDAQ: CDRO), the reasons behind its mixed performance in 2025 differ greatly. Moreover, while a bull run for DraftKings or Flutter may hinge on a successful prediction market pivot, Codere's stronger set of catalysts gives it a clear path to upside in 2026.

Codere Online Luxembourg at a glance

While domiciled in Luxembourg, the company's market is not limited to that small European principality. Codere is the online sports betting and casino arm of Spanish gambling conglomerate Grupo Codere. Codere's parent took it public in 2021 via a special purpose acquisition company (SPAC) merger.

So far, since going public, Codere Online hasn't exactly been a winner for investors. Like other online gambling stocks, its shares fell significantly during 2022. At that time, stocks in this space frequently fell out of favor due to concerns about their respective paths to profitability.

However, after languishing in the low single digits during 2023, shares rebounded to $8 per share in 2024, thanks to improved fiscal results. By shifting its focus back to its home market of Spain, as well as to fast-growing Spanish-speaking markets in Latin America, the company experienced both a significant increase in revenue and a move toward consistently positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Admittedly, over the past year, Codere's share price performance has been mixed. Earlier this year, a now-resolved Nasdaq compliance issue weighed on shares. In September, the abrupt exit of Codere's then-CFO, Oscar Iglesias, resulted in the stock pulling back to just over $5 per share.

Why this sports betting stock may be worth a sweat

Since hitting a new 52-week low in mid-November, Codere Online Luxembourg has rebounded by around 45%. A big reason for this may be the company's latest earnings release. Although Codere's revenue growth has slowed, its adjusted EBITDA continues to rise.

At first, it may seem like investors have overreacted to these solid but not spectacular results. However, consider the longer-term picture. Sell-side analysts' estimates call for Codere to earn $0.43 per share in 2026, and $0.68 per share in 2027.

Hence, this stock is currently trading for around 17.5 times forward earnings and approximately 11 times estimated earnings two years out. Yes, forecasts are far from certain, but several factors suggest that Codere could meet or beat these forecasts. For one, next year's World Cup could spur increased betting across Codere's key markets. Increased traffic to the site could also have synergistic effects if these new users stick around to place other sports bets or to gamble at Codere's online casinos.

Additionally, Codere has high fixed compliance and technological costs, resulting in a high level of operating leverage. Customer acquisition costs are also steadily dropping. With this, it may take only a moderate increase in revenue to drive outsized earnings growth. While staying mindful of the risk of further volatility, long-term investors who are active in small-cap stocks may want to consider buying Codere Online.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Flutter Entertainment Plc. The Motley Fool has a disclosure policy.