Churchill Downs, Penn Entertainment Lauded in New Coverage by Mizuho

Churchill Downs (NASDAQ: CHDN) and Penn Entertainment are among the batch of gaming stocks viewed favorably in new coverage by Mizuho.

Analyst Ben Chaiken initiated coverage of more than a half dozen gaming names, including Churchill and Penn, citing the expansion of the U.S. sports wagering space as a catalyst for the latter. In a report to clients, the Mizuho analyst rated Penn a “buy” with a $29 price target, implying upside of 70% from the March 25 close.

We expect the depth and breadth of the ESPN customer base, and integration with ESPN Bet, should drive efficient customer acquisition providing an edge to PENN relative to 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 shares because, at the moment, little or no value is assigned to Penn’s online sports betting business by the investment community. Chaiken also pointed out that the going could be tough when ESPN Bet enters states with established rivals, indicating that the operator’s success in new sports betting states is pivotal in terms of bolstering market share.

Churchill Downs Praised by Chaiken, Too

Churchill Downs also drew praise from Chaiken, who rates the stock a “buy” with a $142 price target. That implies upside of 20.6% from the March 25 close.

Chaiken also said that regulatory efforts to potentially criminalize some forms of gray market wagering in Kentucky and Virginia could be a boon for Churchill Downs. That’s because the operator is regulated and 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), assigning “buy” ratings to both names.

Constructive on DraftKings, Too

High-flying DraftKings (NASDAQ: DKNG), shares of which are up 38% year to date, also drew praise from Chaiken. He started coverage of the online sportsbook giant with a “buy” rating and a $50 price forecast. That implies upside of 24.7% from Monday’s close.

Chaiken added that DraftKings should continue posting strong sales growth. That’s as more states permit sports wagering, and he believes the operator will be successful in driving marketing expenses lower.