Outlook for iGaming Bullish, Penn National Gaming (PENN), DraftKings (DKNG), and Rush Street Interactive (RSI) All Initiated at 'Buy' at Needham & Company

April 27, 2021 9:04 AM EDT
Get Alerts PENN Hot Sheet
Price: $71.78 -1.58%

Rating Summary:
    20 Buy, 10 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 27 | New: 42
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A team of analysts at Needham & Company, led by Bernie McTernan, is bullish on the online sports betting (OSB) and iGaming TAM in the US. As a result, major players in this space - Penn National Gaming (NASDAQ: PENN), DraftKings (NASDAQ: DKNG), and Rush Street Interactive (NYSE: RSI) - are all started with a “Buy” rating attached to their stocks.

On PENN, the analyst set a $151.00 per share price target amid a “compelling” risk-reward opportunity.

“We are bullish on the online sports betting (OSB) and iGaming TAM in the US and see the potential for PENN to take significant, profitable market share on the strength of Barstool's differentiated content-driven customer acquisition strategy,” McTernan notes in a memo on PENN.

He forecasts a $32 billion market opportunity in the US for OSB and iGaming with the potential for Barstool to grow its market share as a top sport betting media company.

McTernan is also bullish on DKNG, which has an $81.00 per share price target. The stock is also added to the Needham Conviction List as the online gambling market in North America represents “an emerging $35 billion opportunity,” while DKNG is seen as a leader in this space.

“We see DKNG as a leader in the emerging North America online gambling market, a $35B market opportunity. Despite mixed results in NY, we see the currently regulatory environment as supportive, which should lead to a significant growth in legislation, a key reason our '22 and '23 estimates are above consensus. We see a 3:1 risk reward in our bull case vs bear case targets and importantly envision a higher probability of our bull case playing out vs our bear case.”

On the other hand, positive legislative momentum for iGaming is likely to push shares of RSI higher. The price target on RSI is set at $22.00 per share.

“The iGaming market on a per capita basis is on track to be significantly larger than on-line sports betting (OSB), however the legislative environment has not been as supportive. We like RSI's positioning as an iGaming first provider, which means it targets a different core demographic than OSB operators. With supportive legislation being the ultimate catalyst for the stock, we see the app launch/refresh and increasing spend on customer acquisition as catalysts to drive the stock higher,” the analyst concludes.

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