As the recent Super Bowl proved, the sports betting industry continues to thrive.Nevada Sportsbook broke a new record Chiefs vs. 49ers overtime championship, and Online gambling activity surges year-on-year. sports betting stocks Several major companies within the group were simply sold off shortly after their respective earnings reports.
As more states vote in favor of sports betting, we're seeing a veritable battle royale forming between the industry's biggest players. And now, with March Madness just around the corner and a time when gambling activity is likely to skyrocket, the winners and losers are starting to emerge.
Penn Entertainment stock case
Penn Entertainment Inc. (PENN) has expanded from its beginnings in the gaming and racing industry to the rapidly growing sports betting market. With a rich portfolio spanning gaming, racing facilities and online gaming operations, PENN is not only participating in the sports betting revolution. That is what is leading the way. Their innovative online sports betting platform is built to immerse and engage sports fans.
While the overall market is up in 2024, PENN stock has fared worse, declining 34.4% year-to-date. A significant portion of this decline was caused by the company's latest earnings report, which was poorly received by investors.
PENN plunged on February 15 after the company reported lower-than-expected fourth-quarter sales and a higher-than-expected loss per share. Management blamed the disappointing results on heavy investments in its digital business, which is being rebranded from Barstool to ESPNBet under a new partnership with Disney (DIS).
The dissolution of its business relationship with Barstool boss Dave Portnoy is unpleasant for investors, but the stock looks cheap at current levels. PENN's stock trades at 0.36 times forward sales, a fraction of its five-year average of 1.24. This suggests that PENN may be undervalued near current levels based on its growth prospects. If business continues to perform well and the market stabilizes, the stock could be a bargain at this point.
Additionally, the company plans to plant a major flag in New York, the largest game in the online sports betting market. mobile sports betting license From Win Interactive Holdings. They also aim to enter the North Carolina market by March, and these two moves should increase the total addressable online sports betting market to 46%.
Of the 16 analysts surveyed, PENN rates the stock as a “moderate buy” based on a mix of 5 “strong buys,” 1 “moderate buy,” and 10 “holds.” The average price target is $29.25, implying a 71% upside from Friday's closing price.
The case for DraftKings stock
DraftKings Inc. (DKNG) is a digital sports entertainment and gaming company that is making waves in the online sports betting industry. Known for its daily fantasy sports contests and sports betting platform, DraftKings has become the go-to destination for bettors looking for a dynamic and interactive way to enjoy their favorite sports. The company's commitment to providing an immersive betting experience has established it as a major player in the sports betting space.
DKNG has definitely outperformed PENN in terms of price volatility, with an impressive 17% increase so far in 2024.
This is even after taking into account DKNG's own post-earnings pullback, as DKNG's stock price is now down more than 7% since announcing mixed fourth-quarter results on February 15th. The company announced its 2024 sales forecast of $4.65 billion to $4.9 billion, which exceeded expectations. Midpoint – DKNG closed almost flat the day after the report.
Additionally, DKNG's valuation still looks expensive at 4.04 times estimated sales. High growth certainly justifies some premium, but investors should be careful not to pay too much, especially given the stock's lackluster earnings response.
While PENN has its eye on New York, DraftKings has recently Get the lottery app Jackpocket At the impressive price of $750 million. The move underscores DraftKings' ambition to diversify its offerings and explore new markets.Notably, DKNG also Multi-year betting partnership agreement with Barstool Sports.
Analysts remain bullish on DKNG, which has a consensus rating of “Strong Buy” on Wall Street. Of the 27 analysts, 22 rated it a “strong buy,” two rated it a “moderate buy,” two rated it a “hold,” and only one recommended a “sell.” The average price target of $44.35 represents a modest 7% upside from Friday's closing price.
Which stocks should I buy?
There's no doubt that DraftKings (DKNG) is popular in digital gaming and sports betting. However, Penn (PENN) has some winning spots to pass up, including incredible reach and branding from ESPN and Disney. PENN's price action may not be as flashy as it pivots away from Barstool, but the stock's attractive valuation and upside potential make it a better buy than DKNG at current prices. is persuasive.
On the date of publication, Ebbw Jones did not have (directly or indirectly) any positions in the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.