When your franchise cable channel is struggling after being the mainstay of cable since the beginning, then making a huge change and embracing the now solidly legal sports gaming industry makes a ton of sense. That is exactly what Walt Disney, the owner of ESPN, is doing. With consumers fleeing cable for streaming services, and Disney taking some big hits on horrible offerings from its entertainment segment, it is no surprise it made the move to embrace sports gambling, especially when it gets paid in a big way for its brand.
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Under a recently signed deal, the legacy sports broadcasting giant and casino owner Penn Entertainment agreed to jointly launch a sports betting business under the brand ESPN Bet. Under the terms of the deal, Penn will pay ESPN $1.5 billion in cash and offer about $500 million worth of warrants to purchase its shares over an initial 10-year term in exchange for the brand, promotional services and other rights. While expensive, the sheer magnitude of the ESPN reach is a potential game changer for the sports gaming business.
At 24/7 Wall St., we like to hedge our bets and see who the winners and potential losers could be. We screened our gaming database and cross-referenced the potential implications down the road for the stocks and the industry. With the NFL season in full effect, and the betting handle expected to explode higher this year, we found five stocks investors may want to consider.
While all these stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Caesars Entertainment
Shares of this well-known old-school gaming company are offering solid upside. Caesars Entertainment Inc. (NASDAQ: CZR) provides casino entertainment and hospitality services, primarily under the Harrah’s, Caesars, Horseshoe and Eldorado brand names, in the United States. It owns, leases or manages domestic properties in 16 states with slot machines, video lottery terminals and e-tables, and hotel rooms, as well as table games, including poker.
Caesars Entertainment also operates and conducts sports wagering across 28 jurisdictions in North America, including mobile for sports betting and regulated online real money gaming in six jurisdictions; retail and online gaming and sports betting; and other games, such as keno. In addition, the company operates dining venues, bars, nightclubs, lounges, hotels and entertainment venues, and it provides staffing and management services.
Wells Fargo’s $77 target price on Caesars Entertainment stock compares with a consensus target of $73.31 and the closing price on Monday of $53.44 a share.
DraftKings
This company is a sector leader, and shares backed up some after the Penn-ESPN deal was announced. DraftKings Inc. (NASDAQ: DKNG) operates as a digital sports entertainment and gaming company. It offers multichannel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries.
The company operates iGaming through its DraftKings brand in five states, as well as operates Golden Nugget Online Gaming, an iGaming product and gaming brand, in three states. Its Sportsbook is live with mobile and/or retail betting operations in the United States pursuant to regulations in 18 states.
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DraftKings’s daily fantasy sports product is available in six countries with 15 distinct sports categories. In addition, it offers DraftKings Marketplace, a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions, as well as owns Vegas Sports Information Network, a multiplatform broadcast and content company.
The Truist Financial price target is $44. DraftKings stock has a $36.05 consensus target, and Monday’s closing print was $31.79.
MGM Resorts
This is another old-school gambling play that has jumped into the online and mobile sports gambling arena. MGM Resorts International (NYSE: MGM) owns and operates casino, hotel, and entertainment resorts in the United States and Macau that offer gaming, convention, dining, entertainment, retail and other resort amenities.
The company’s casino operations include slots and table games, as well as online sports betting and iGaming through BetMGM. Its customers include premium gaming customers; leisure and wholesale travel customers; business travelers; and group customers, including conventions, trade associations and small meetings.
The $66.50 Citigroup price objective is a Wall Street high. The consensus target is $57.45, and MGM Resorts stock closed on Monday at $42.70.
Penn Entertainment
This is an analyst favorite for online gaming and gambling, and it announced the aforementioned deal with ESPN last month (which some feel it may have overpaid for). Penn Entertainment Inc. (NASDAQ: PENN) provides integrated entertainment, sports content and casino gaming experiences in North America. It operates online sports betting in various jurisdictions, as well as iCasino under a portfolio of brands, including Hollywood Casino, L’Auberge, Barstool Sportsbook and theScore Bet.
The company’s portfolio also includes MyChoice, a customer loyalty program that offers a set of rewards and experiences for business channels. In addition, it owns various trademarks and service marks, including Ameristar, Argosy, Boomtown, Greektown, Hollywood Casino, Hollywood Gaming, L’Auberge and M Resort.
In the blockbuster deal, ESPN will license its name to casino and sports betting operator Penn Entertainment in a deal worth $1.5 billion over 10 years. Penn Entertainment is trading one sports media brand as a betting partner (Barstool Sports, which was sold back to founder Dave Portnoy for $1) for one with an even bigger name, cable sports giant ESPN.
While taking a huge loss on the Barstool Sports investment, Penn hopes the deal will give a huge upgrade to its gambling business. The strategic partnership should provide Penn with access to ESPN’s audience of 370 million across all social platforms, 105 million monthly unique digital users and 25 million ESPN+ subscribers.
Penn Entertainment stock has a $44 target price at Needham, while the consensus target is just $33.07. The shares closed at $21.70 on Monday.
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Wynn Resorts
This opulent casino company is the high-end of the industry and offers very solid long-term growth potential. Wynn Resorts Ltd. (NASDAQ: WYNN) designs, develops and operates integrated resorts. The company operates through the following four segments.
The Wynn Palace segment operates private gaming salons and sky casinos; a luxury hotel tower with suites and villas, including a health club, spa, salon and pool; food and beverage outlets; retail space; meeting and convention space; and performance lake and floral art displays.
The Wynn Macau segment operates casino space with private gaming salons, sky casinos and a poker room; a luxury hotel tower that includes health clubs, spas, a salon and a pool; food and beverage outlets; retail space; meeting and convention space; and Chinese zodiac-inspired ceiling attractions.
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