JMP Analyst Names 5 Gambling Stocks To Buy On The Dip

Zinger Key Points
  • Online sports betting and iGaming have been tremendous growth sources.
  • Early market leaders are struggling with heavy losses associated with aggressive marketing and advertising spending.

It's been a rough year so far for casino and online gambling stocks, but one firm has identified a handful of gambling stocks that investors should consider buying on the dip.

The Analyst: JMP Securities analyst Jordan Bender has initiated coverage of the following five stocks:

  • Rush Street Interactive Inc RSI, Market Outperform rating, $12 price target.
  • Penn National Gaming, Inc PEN, Market Outperform rating, $52 price target.
  • MGM Resorts International MGM, Market Outperform rating, $55 price target.
  • Golden Entertainment Inc GDEN, Market Outperform rating, $63 price target.
  • DraftKings Inc DKNG, Market Outperform rating, $25 price target.

Related Link: Final Draft Of Macau Gaming Law: What Investors Need To Know

The Thesis: Bender broke down his bullish stance on iGaming, online sports betting and the Nevada casino market.

U.S. iGaming legislation could be a major catalyst for Rush Street, Bender said.

"As NA online sports betting (OSB) and iGaming markets ramp, we believe gross gaming revenue (GGR) of ~$8.1B in 2021 will reach $39B by 2030E (23% CAGR), $3.9B in Canada (30% CAGR), and >$800M in Colombia/Mexico," he wrote.

Related Link: MGM Resorts Analysts React To Q1 Earnings Beat, LeoVegas Acquisition, Macau Weakness

Bender said Penn's Barstool brand differentiates it from competitors.

"Barstool complements PENN’s casino database to create customizable content and product for a younger, more football-focused audience, a similar demographic to the OSB player," he said.

Bender values BetMGM at $15 billion and says MGM is the market leader in iGaming.

"We believe a combination of BetMGM’s omni-channel, with 37m database members, along with Entain’s market-leading technology positions it ahead of the competition," he wrote.

Golden Entertainment is focused primarily on Nevada, but Bender said it is diversified within the state.

"Nevada is one of the healthiest U.S. gaming markets, and despite volatility in the broader macro environment, our recent visit points to no slowdown for the core casino customer or the size of the wallet," he said.

Finally, Bender said DraftKings is a high-growth, vertically integrated online sports betting and daily fantasy sports market leader.

"While we are in [the] early innings of the online gaming sector, we think DKNG can maintain top share in NA online gaming, driven through cross-sell and its superior technology capabilities in SBTech, leading to profitable growth," he said.

Benzinga's Take: There are several different dynamics playing out in the gambling space these days that make stock selection critical. Ongoing lockdowns in China has made Macau an albatross for casino stocks, while Las Vegas has recovered nicely from the pandemic. In addition, online sports betting and iGaming have been tremendous growth sources, but some of the early market leaders are struggling with heavy losses associated with aggressive marketing and advertising spending.

Posted In: JMPJordan BenderAnalyst ColorPrice TargetInitiationSmall CapAnalyst Ratings

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