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DraftKings (DKNG) Vs Penn National Gaming (PENN): Which Gaming Stock Is A Better Buy?

2 top e-gaming stocks to watch if you’re a growth investor.

dkng stock vs penn stock

Which Of These Gaming Stocks Is On Top Of Your List?

DraftKings (NASDAQ: DKNG) and Penn National Gaming (NASDAQ: PENN) are among the top gaming stocks to watch. This came as more states allow sports betting and online sports betting in the country. During the pandemic, many turn to digital sports betting to fill up their leisure time. While it may not be as exciting as flying to Vegas to place the chip yourself, it sure is a form of entertainment many would resort to during the pandemic. 

The GameStop (NYSE: GME) saga may have resurfaced in recent weeks. But as good as speculation gets, stock prices will eventually have to reflect the fundamentals. Despite the stay-at-home orders and lockdown, in-home entertainment has prospered. It’s quite understandable as people sheltering at home are spending more time on gaming. DraftKings and Penn National Gaming are looking to cash in during the pandemic.

Gaming would of course be a ‘stay at home’ activity. With that, gaming companies would benefit from this predicament of the COVID-19 pandemic. Instead of joining the speculators and betting on GameStop’s longshot turnaround, investors may be better off considering these two sports betting stocks that are trending in the stock market today. But the real question here is, which gaming stock is the better bet? Here’s how these two stack up against each other. 

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DraftKings Inc. (DKNG) Stock Soars As Quarterly Report Top Estimates

DraftKings stock has been on the rise as of late and started the week on a strong note by closing 11.7% higher on Monday. This came after several analysts increased their price target for DKNG stock. For one, the upgrade from Goldman Sachs (NYSE: GS) reiterated his ‘Buy’ rating on the stock and increased the price target to $73.

Also, Michael Graham from Canaccord Genuity reiterated his ‘Buy’ rating on the stock and upgraded his price target from $65 to $80. The analyst praised DraftKings’ strong competitive position within the burgeoning online gambling market. He also suggested that DraftKings’ revenue growth could potentially come very much higher this year in comparison with the 40% to 55% increase the management predicted. 

Following a series of upgrades, the company has justified all the excitement by reporting stellar fourth-quarter results. Revenue came in at $322 million, representing an increase of 146% year-over-year, beating Wall Street’s estimates. “The strong Q4 caps off a blockbuster that saw the company meaningfully expand its geographic footprint and user base while strengthening its balance sheet,” Graham said.

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Cathie Wood’s ARK Invest Loads Up DKNG Stock, Sparking Demand 

It’s already not a secret that ARK Investment invested in DraftKings. But since the announcement, DKNG stock has soared nearly 20% to date. ARK Invest, which focuses on disruptive companies, is highly optimistic about what DKNG has to offer. After all, national online gambling is growing at a rate of 13.2% annually and more states are aiming for legalization. There are good reasons to believe that DKNG stock has more room to grow in the long run. 

Source: TD Ameritrade TOS

Cathie Wood likes DKNG stock so much her fund bought the stock twice. The second time of purchase of 443,500 shares came about a week after ARK purchased 623,000 shares of DKNG stock. Both acquisitions add up to 0.54% of the gaming company’s outstanding equity.

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Penn National Gaming (PENN) Has A Gambling Partner To Count On

Despite ARK Invest’s optimism in DKNG stock, many believe that Penn National Gaming could be a better gaming stock to buy. DraftKing may have gotten a boost from ARK Invest as its shareholder.

But Penn National has Barstool Sports as its gambling partner. So, what does Barstool Sports bring to the table? As of 12 months ago, the sports media brand has 66 million monthly active users. There is no denying Barstool’s ability to bring users to Penn.

To put things in perspective, Barstool attracts more gamblers to its content monthly than the NFL estimated it would attract over the entire 2020 season. In comparison, DraftKings does not have access to such a huge fan base. 

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New Partnership Signals New Opportunities For PENN Stock

Last week, Penn National revealed that it had entered into a 20-year strategic partnership with Rivers Casino in New York. This marks a groundbreaking move by the company because of New York’s potentially lucrative online sports betting market. Together with several other states, the Big Apple is looking at this industry to boost state revenue. If that wasn’t enough, Google (NASDAQ: GOOGL) will also allow real-cash gambling apps and related ads to run on U.S. smartphones starting today. 

Source: TD Ameritrade TOS

Of course, the most important partnership by far is still the one with Barstool Sports. The sports media conglomerate hosts two of the nation’s most popular 20 podcasts and enjoys meaningful advertising and merchandise revenue streams. Despite the pause in most sports throughout most of 2020, the organization saw its sales and profitability reach record achievement while some other sports media companies floundered.

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DKNG Stock Vs PENN Stock

If you are bullish on online sports betting, both DKNG stock and PENN stock have the potential to continue to outperform the broader market in the near to medium term. Both are in a great position to benefit as more states in the U.S. plan to narrow their budget gaps with tax collections from these services.

In my view, Penn National seems to have some upside at the moment because of its Barstool Sports partnership. No company has come close to this partnership when it comes to having an army of active gamblers. This built-in fan base is simply unique and can’t be achieved in a short period of time. It seems to me that this represents a massive advantage for Penn. 

Don’t get me wrong though, this is not to say DKNG stock is a bad investment idea. Everybody knows Cathie Wood’s ability in stock picking. And you could expect meaningful success with most if not all of her investments. For skeptics who worry about the valuation of DKNG stock, the quarterly report this week proves that it certainly has the ability to grow into its valuation. Now, there is no reason to believe that online gaming will be a winner-take-all game. If you would like to spread your bets, these will be solid names however you look at them.

By Joe Samuel

Joe Samuel is a dedicated stock market researcher and financial contributor. His love for the stock market started at a young age learning from his grandfather. Joe earned a bachelor of science degree in corporate finance and business management. After finishing college, he went the route of an entrepreneur starting numerous businesses and eventually became a financial contributor to a number of outlets including Seeking Alpha, Invesitng.com, and actively contributes to FactSet. At StockMarket.com, Joe looks for emerging stories. One of his traits is identifying new trends before they become mainstream. Whether it’s a biopharmaceutical company debuting a novel treatment or the next technology start-up developing a new platform, Joe looks to be on the cutting edge of that trend.

After years of living in New York, he made the move to Miami, Florida where he’s become an active member of the finance community. Joe has worked with early-stage companies in marketing and consulting capacities, which has given him an opportunity to see what makes companies tick. His viewpoint is that while corporate news is vital to any investment, it’s what isn’t “right in front of you” that can make a good investment great. His approach to the markets is one that aims to deliver information that might not be well-known. But through deep research and diligence, Joe has written about and been able to uncover time-sensitive information when seconds matter in the stock market today.

Joe enjoys covering several stock market sectors. These include commodities, finance, biotechnology, and technology; specifically AI & machine learning. His no-nonsense approach to the market gives readers a cut and dry view of the news that matters most and topics beginning to emerge as new trends in the stock market. He was early to the table with calls on things like the last gold rush in 2019 and has been able to identify influential events and how they could impact certain industries.

During his free time, he enjoys spending time with his family and polishing up one new stock market trends. He’s also an avid car enthusiast with a passion for classic and muscle cars.

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