Craig-Hallum Trims Targets on Six Gaming Stocks, Including DraftKings, Penn National

Posted on: January 4, 2022, 10:56h. 

Last updated on: January 4, 2022, 11:21h.

Craig-Hallum analyst Ryan Sigdahl is out with a broad commentary on gaming stocks today, trimming price targets on six names.

gaming stocks
Slot machines at a Penn National casino. Craig-Hallum analyst Ryan Sigdahl lowered price targets on six gaming stocks, including Penn. (Image: TheStreet)

While the analyst isn’t overtly bearish on the stocks, he’s paring price outlooks on six companies – all of which have ties to internet casinos and online sportsbooks. That group includes DraftKings (NASDAQ:DKNG) and Penn National Gaming (NASDAQ:PENN), two of last year’s most severely punished gaming stocks.

While maintaining a “buy” rating on DraftKings, Sigdahl slashes his price target on that stock to $51 from $70, joining a growing list of analysts lowering price forecasts on the online sportsbook operator. On the upside, the analyst says online sports wagering is a megatrend that’s still in its early innings, and the scarcity of ways with which to play that trend are favorable points for DraftKings.

He believes the operator can bolster iGaming market share and earnings before interest, taxes, depreciation and amortization (EBITDA) ahead of its previously announced forecast.

Penn Not Fully Appreciated

Of the six companies that are receiving lower price estimates from Sigdahl, Penn National is the only one that runs land-based casinos.

In fact, the company is the largest regional casino operator in the US. The Craig-Hallum analyst trims his price forecast on Penn to $96 from $130, while acknowledging brick and mortar casinos provide strong cash flow Penn can use to fund internet investments, including Barstsool Sportsbook.

While Penn has been synonymous with David Portnoy’s Barstool Sports for two years after taking a 36 percent stake in that media property in January 2020, Sigdahl says the marriage of Barstool’s devoted fan base, favorable demographics, marketing prowess and Penn’s multi-state footprint “creates an unrivaled omnichannel offering.”

Penn stock was repudiated last year, and it resides 65.44 percent below its 52-week high. But some analysts are highlighting it as a 2022 rebound candidate.

Slew of Gaming Tech Stocks Get Trimmed

Sigdahl also takes the ax to his price targets on sports betting data providers Genius Sports (NYSE:GENI) and Sportradar. He lowers the former to $22 from $27, and the latter to $30 from $35.

He notes both companies continue sporting impressive compound annual growth rates and stout EBITDA margins. The analyst adds both companies compare favorably with traditional big data purveyors, and offer superior margin expansion potential relative to entrenched companies in the data space.

Speaking of gaming tech names, Sigdahl pares his price target on GAN (NASDAQ:GAN) to $14 and $18. While he likes near-term trends for the gaming software provider, he adds GAN could face competitive threats as its model evolves to include more exposure to business-to-consumer clients.

The other gaming stock Sigdahl lowers his price estimate on is Rush Street Interactive (NYSE:RSI). The analyst goes to $19 from $22 on that stock while maintaining a “buy” rating on the iGaming and online sportsbook operator.