Wall Street says these gaming stocks have big upside as NFL kick-off boosts interest

Published Fri, Sep 8 202311:26 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

The start of the NFL season could see a flood of sign-ups and activity on sports gambling apps, and several of the stocks tied to the industry have significant upside, according to Wall Street analysts. The NFL season began on Thursday, with the Detroit Lions defeating the Kansas City Chiefs. There are 15 more games on Sunday and Monday, and gambling will likely be a hot topic on pregame shows and frequently promoted during commercial breaks. The gaming stocks listed below have buy ratings from more than 60% of analysts and upside to the average price target of greater than 20%, according to FactSet. Caesar's Entertainment has the most upside on the list, with an average price target 37% above its most recent closing price. And Caesar's is more than just an online sportsbook. Barclays analyst Brandt Montour said in a Sept. 7 note to clients that Caesar's could see a boom in non-sports online gambling. "We're expecting the biggest gains over the next 12 months to accrue to CZR following last month's launch of its new stand-alone iGaming app. We see CZR's current iGaming market share as unnaturally low compared to its retail casino footprint/loyalty/expertise, and with ongoing momentum on the product side, is poised to move higher over the next 12 months, in our view. This, combined with low digital expectations and cheap overall equity valuation, make CZR our most favored name within Gaming," Montour said. MGM Resorts International is another example of a company that has a diversified gaming portfolio. Its stock has 33% upside, according to FactSet. "BetMGM, market share leader (in active states), is also the leader in content breadth, though skews heavily to slots, which matches well with its casino-first customer database, brand and land-based footprint," Montour said. The most well liked stock on the list, however, is more specialized. Churchill Downs has a buy rating from 100% of the analysts covering it, according to FactSet, even though its online betting platform TwinSpires represents a minor piece of its revenue compared to the Kentucky Derby. To be sure, recent history shows that gambling stocks actually struggle once the NFL season starts , though the sample size is small given the recency of legalized online betting in the U.S. Still, market leader DraftKings had strong results during the opening weeks of the season last year, according to Needham. "DKNG called out a $70M benefit in 3Q23 (14% of 3Q revenue) with NFL underdogs generally performing well in September as well as primetime games falling in their favor. For context, in the games with the five largest spreads in 3Q, the favorites won 10 out of 14 (one tie) and covered the spread in 7 out of 15. In 4Q23, DKNG noted a $10M benefit from (~1% of 4Q revenue) sport outcome," Needham analyst Bernie McTernan said in a Sept. 6 note to clients. DraftKings is Needham's top pick in gaming, though the average analyst price target on the stock is below 20%. — CNBC's Michael Bloom contributed reporting.