The increasing penetration of smartphones and increasing technological advancements have spurred the growth of the gaming and gambling industry. While DraftKings (DKNG) should benefit from a growing online gaming trend, Boyd Gaming (BYD) should benefit from the revival of foot traffic in physical casinos. But which of these stocks is a better buy now? Read on to find out.


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DraftKings Inc. (DKNG) Based in Boston, Massachusetts, DKNG operates as a digital sports gaming and entertainment company in the United States and around the world. Boyd Gaming Corporation (BYD) operates as a multi-jurisdictional gaming company. It is also engaged in owning and operating a travel agency.

The growing adoption of smartphones has boosted the online gambling market. Mobile users represent approximately 80% of all users in the online gaming industry in most countries. Physical casinos are also seeing a revival in foot traffic with the easing of COVID-19 related restrictions.

Despite macroeconomic headwinds, commercial gaming in the United States generated record revenues in the second quarter of 2022. Data compiled by the AGM shows that domestic revenues from traditional casino games, sports betting and iGaming have exceeded $14.81 billion in the second quarterup 8.8% year-on-year.

The global online gambling market is expected to reach $115.13 billion in 2026, growing at a steady pace. 9.2% CAGR.

DKNG has gained 27.4% over the past month against BYD’s returns of 0.8%. However, BYD is the big winner with a 16% decline compared to DKNG’s 37.2% decline in year-to-date performance.

But which stock is better to buy now? Let’s find out.

Latest developments

In June, DKNG and BetBlocker, a leader in responsible gaming and the safer non-profit charity, announced their collaboration to raise awareness and access to BetBlocker’s acclaimed software. “BetBlocker’s contributions to safer gambling are commendable and DraftKings is delighted to partner with this enterprising and disruptive non-profit organization that advances responsible gambling in a global and consumer-friendly way,” said Chrissy Thurmond, Senior Director of Responsible Gambling, DraftKings. .

That same month, UFC and DKNG announced plans to launch a new iteration of DKNG’s UFC-focused “Reignmakers” digital collectibles franchise. Reignmakers UFC will allow fans to create collections of their favorite UFC fighters and use them in games to compete for prizes. The first season of Reignmakers-based UFC NFT games is set to go live later this year.

In June, BYD announced that its board had authorized a $500 million increase in the company’s existing stock buyback program. The authorization will allow the company to continue share repurchases as it completes its previous repurchase authorizations, totaling $361 million.

Recent financial results

During the second quarter ended June 30, 2022, DKNG’s operating expenses increased 25.2% year-on-year to $775.00 million. Its operating loss was $308.92 million, while its adjusted EBITDA rose 24% from its prior year value of $118.13 million.

For the second quarter ending June 30, 2022, BYD’s total revenue increased slightly year-over-year to $894.45 million. His operating result stood at $245.07 million, while its net profit rose 29% year-on-year to $146.76 million. The company’s EPS rose 33% from its year-ago quarter to $1.33.

Past and expected financial performance

DKNG’s revenue has grown at a CAGR of 78.9% over the past three years. Analysts expect DKNG’s revenue to grow 97.7% in the current quarter. The company’s EPS is expected to grow 21.5% in the current quarter, 15.3% in the current year and 29.7% next year. However, its EPS is expected to decline at a rate of 6.8% per year over the next five years.

On the other hand, BYD’s revenue grew at a CAGR of 4.17% over the past three years. Analysts expect BYD’s revenue to grow 1.7% in the current quarter and 3.1% in the current year. The company’s EPS is expected to grow 7.8% in the current quarter and 7.8% in the current year. Its EPS is expected to grow at a rate of 4.2% per year over the next five years.

Profitability

BYD is more profitable, with a gross profit margin of 72.67% against 33.1% for DKNG. Further, BYD’s net income margin of 16.03% compares to DKNG’s negative net income margin of 99.15%.

Additionally, BYD’s ROE, ROA, and ROTC of 38.63%, 0.12%, and 10.82% compare to DKNG’s negative 78.41%, 0.43%, and 32.07%, respectively.

Evaluation

In terms of EV/Forward Sales, DKNG is currently trading at 3.73x, 36.6% higher than BYD’s 2.73x. Additionally, DKNG’s trailing 12-month price-to-sales ratio of 4.79x is 164.6% higher than BYD’s 1.81x.

POWR Rankings

DKNG has an overall rating of D, which is equivalent to selling in our own POWR Rankings system. On the other hand, BYD has an overall rating of B, which translates to Buy. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BYD has a B rating for value, in sync with the company’s updated valuation. On the other hand, DKNG has a D for Value, which is justified given its premium valuation. Additionally, BYD has an A for profitability, which is consistent with its higher profitability. On the contrary, DKNG has a D rating for quality, given its low profitability.

Of the 28 shares listed F Entertainment – ​​Casinos/Gambling industry, DKNG is ranked #26 while BYD is ranked #3.

Beyond what we’ve stated above, we’ve also rated stocks for growth, momentum, stability and sentiment. Click here to see the DKNG ratings. Get all BYD ratings here.

The winner

While DKNG and BYD should benefit from industry tailwinds, BYD’s relatively lower valuation and higher profitability make it a better bet now.

Our research shows that the odds of success increase when investing in stocks with an overall strong buy or buy rating. View All Top Rated Stocks in Entertainment – Casinos/Gaming here.


Shares of DKNG rose $0.17 (+0.99%) in premarket trading on Tuesday. Year-to-date, DKNG is down -37.24%, compared to a -12.32% rise in the benchmark S&P 500 over the same period.


About the Author: Spandan Khandelwal

Spandan’s is a financial journalist and investment analyst specializing in the stock market. Through its ability to interpret financial data, it aims to help investors assess a company’s fundamentals before investing.

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