Churchill Downs and Penn Entertainment praised in new Mizuho report
Churchill Downs (NASDAQ: CHDN ) and Penn Entertainment were among the gaming stocks that received a positive review from Mizuho's new report.
Analyst Ben Chaiken initiated coverage on six bookmakers, including Churchill and Penn, citing the expansion of US sports betting as a catalyst for the latter. In a note to clients, Mizuho analysts rated Penn a "buy" with a price target of $29, implying 70% upside potential from the March 25 closing price.
"We expect the depth and breadth of ESPN's customer base and integration with ESPN Bet will result in efficient customer acquisition and give PENN an advantage over other operators," Chaiken noted.
Chaiken added that Penn's land-based regional casino operations are undervalued, while calling ESPN Bet a "call option" on the operator's stock because Penn's online sports betting operations currently receive virtually no value from the investment community. Chaiken also noted that things could be difficult if ESPN Bet enters states with established competitors, suggesting the operator's success in new sports betting states is critical to strengthening market share.
Churchill Downs also received praise from Chaiken
Churchill Downs also received praise from Chaiken, who rated the stock a "buy" with a $142 price target. It rose 20.6% from the closing price on March 25.
Chaiken noted the addition of Churchill Downs to its project pipeline, which includes casinos in Indiana and Virginia, as earnings before interest, taxes, depreciation, and amortization (EBITDA) increase, adding to the region's already solid gaming operator's ability to generate free cash flow. And support for Kentucky's namesake track is not fully reflected in the stock price.
Chaiken also said regulatory efforts in Kentucky and Virginia to criminalize certain forms of gray market gambling could be beneficial to Churchill Downs because the operator is regulated and is one of the largest in those jurisdictions .
The analyst is also bullish on other regional casino operators, including Boyd Gaming (NYSE: BYD) and Red Rock Resorts (NASDAQ: RRR), giving both companies a "buy" rating .
Also be constructive at DraftKings
Chaiken also praised the success of DraftKings (NASDAQ: DKNG ), which has seen its shares rise 38% since the beginning of the year. He initiated coverage of the Online Sports Betting Giant with a "Buy" rating and a $50 price prediction. That's a 24.7% increase from Monday's closing price.
Chaiken noted that the operator has more than 30% market share in North America and said DraftKings is "the leading online sports betting and iGaming company in North America" and that Wall Street has "extended the business's undervalued level of operating leverage."
Chaiken added that DraftKings should continue to see strong revenue growth as more states allow sports betting, and he believes the operator will be able to reduce marketing costs.
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Source: www.casino.org
