Roth Capital Partners called out a tactical opportunity on U.S. iGaming stocks in a new note published on Wednesday.
Ahead of the college and pro football seasons, analyst Edward Engel pointed out that online sports betting and iGaming stocks have historically outperformed between mid-summer and the start of NFL season as the sports calendar swings from trough to peak. Engel and team also believe investors are buying into the narrative of OSB profitability after Q2 commentary from FanDuel ( OTCPK:PDYPY ), Penn National Gaming ( PENN ), and Caesars Entertainment ( CZR ) was incrementally positive.
The firm is still skeptical that 30%long-term EBITDA margins are achievable within the sector, but believe iGaming stocks are discounted enough to rerate higher even if 20% to 25% margins are the reality.
Roth Capital Partners upgraded DraftKings ( NASDAQ: DKNG ) to a Buy rating from Neutral and kept a bullish stance on Rush Street Interactive ( RSI ) while taking the price target up to $11. Roth has a Neutral rating on Penn National Gaming ( PENN ) and price target of $40. Other firms have singled out upside for MGM Resorts ( MGM ) as the BetMGM business gets more attention, as well as Churchill Downs ( CHDN ) and Boyd Gaming ( BYD ).
The pro and college football season heats up in early September with sports betting legal in more than two dozen states. Despite all the new markets, sports betting operators have cut back on advertising on a percentage basis with a bigger focus on the profitability track.
Read the latest breakdowns on DraftKings ( DKNG ) from Seeking Alpha authors.
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