Although it was carried on across the United States every single day of the year for literally hundreds of years, sports betting was only legal in Nevada and Delaware. After years of efforts to change the rulings that kept it illegal, that prohibition came to an end in 2018, when the U.S. Supreme Court ruled in the favor of individual states on a case involving the constitutionality defined by a 1992 law, the Professional and Amateur Sports Protection Act, which prohibited states other than Nevada and Delaware from operating sports betting.
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Since that time, numerous states have passed laws that allow both sportsbook gambling in casinos and online sports and betting. While those stocks leaped on the national and state legal changes, they have recently seen a major pullback. The analysts at Goldman Sachs say now is the time to buy shares in front of upcoming earnings reports:

With most of the stocks in our coverage at or above their pre-pandemic enterprise values, we continue to focus on the opportunities with longer-term idiosyncratic growth or benefits post-pandemic. Specifically, we are Buyers of the pullback in Online Sports Betting/iGaming following recent underperformance as we continue to see a combination of one of the best long-term growth stories across consumers coupled with accelerating trends in the next few quarters as easier comparisons are lapped and adoption continues to ramp with states opening. We also see structural opportunity in the regional market from older customers returning to the properties and some portion of younger customers being retained all while promotions likely remain subdued given consolidation and strategy changes from the largest players.

The analysts have three stocks rated Buy, all of which are leaders in the industry, and they are great long-term ideas for growth stock investors with a higher risk tolerance. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

DraftKings

Shares of this industry leader have backed up nicely, offering a great entry level. DraftKings Inc. (NASDAQ: DKNG) operates as a digital sports entertainment and gaming company. It provides users with daily sports, sports betting and iGaming opportunities. It also is involved in the design and development of sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products.

DraftKings entered the market in April 2020 at a time when most companies were putting off their initial public offerings. The offering was not an IPO in the truest sense because DraftKings came public through a merger with a special purpose acquisition company called Diamond Eagle, but similar rules applied, a practice that has grown exponentially since then.
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Last year, the company introduced 2021 revenue guidance of $750 million to $850 million, which equates to 45% year-over-year growth, using the midpoints. The Goldman Sachs research report said this:

We increased our first quarter 2021 estimate to factor in higher monthly unique players or MUPs in the quarter on the back of new state launches in Michigan and Virginia and sustained downloads. Though MUPs and app downloads have historically declined quarter to quarter from the fourth quarter to the first quarter app downloads increased between the first and fourth quarter We acknowledge a portion of those downloads represent users who may have downloaded the app ahead of new state launches, and therefore embed MUPs declining by about half the historical rate in our estimates. As such, we are 12%/11% above Consensus in the first quarter for MUPs/Revenue and await the results for additional insight into the relationship between MUPs and downloads.

The Goldman Sachs team raised the price target on the shares to $88 from $87. The lower Wall Street consensus target is $73.27. DraftKings stock closed Wednesday at $58.78, after rising almost 6% on the day. The company is expected to report on May 7.

Penn National Gaming

This is an analysts’ favorite for online gaming and shares have backed up nicely after a massive run earlier this year. Penn National Gaming Inc. (NASDAQ: PENN) owns and manages gaming and racing properties, and it operates video gaming terminals with a focus on slot machine entertainment.

The company also offers live sports betting at its properties in Indiana, Iowa, Mississippi, Nevada, Pennsylvania and West Virginia, and it operates an online casino under the name of iCasino in Pennsylvania.

Last year, Penn National bought a 36% stake in Barstool Sports valued at $450 million, along with options to increase its stake to 50% in the future. Barstool is a sports media empire that claims 66 million monthly active users, roughly 100 million social media followers and two of the top 30 podcasts in the country.

The analysts said this about Penn National:

We update our model for disclosures from regional markets. Our revenue/EBITDA estimates for first quarter of 2021 move 4.5%/5.3% higher following better-than-expected results in Michigan, Ohio, Indiana, Mississippi and Louisiana offset by slightly weaker results in the West and Midwest segment. We update our sum-of-the-parts to reflect our updated 2033 online sports betting total addressable market at $38.1 billion, and roll forward our Discounted cash flow/Sum-of-the-parts price targets by one quarter.

With a huge growth potential, and a big drop in the share price, this is an incredible play for aggressive growth investors.
Goldman Sachs has a massive $158 price handle on Penn National Gaming stock, which was raised from $153. The much lower consensus target price is $108.85 per share. Wednesday’s closing print was $92.51, which up close to 4% for the day. The company is set to release earnings on May 6.
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VICI Properties

This is the top pick across Wall Street in the net lease group, and it is an ideal pick for more conservative investors. VICI Properties Inc. (NYSE: VICI) is a triple net lease real estate investment trust (REIT) that was spun out of Caesars Entertainment post-bankruptcy.

The company has 23 mixed-use gaming, lodging and entertainment properties in its portfolio, and a subsidiary that owns four championship golf courses. VICI also owns roughly 34 acres of undeveloped land in Las Vegas, which it leases to Caesars.

The research report had this to say:

We update our model to reflect the closing of the equity raise (69 million shares at a public offering price of $29) on 3/8/21. In addition, we roll-forward our price target by one quarter. Our revenue/EBITDA estimates remain unchanged though our Adjusted funds from operations estimates for 2021/2022 move -6%/-7% lower on the higher share count.

Investors receive a 4.32% distribution. The $32 Goldman Sachs target price ticked up to $33, while the posted consensus target is $24.50. VICI Properties stock closed trading Wednesday at $30.53 a share, and the quarterly report is slated to be released on April 29.

The massive potential for the total addressable market is more than enough reason for investors with a solid risk appetite to add one or all of these stocks to portfolios. Add in the selling over the past 60 days, and the fact that the shares all trade at the best levels in some time, investors are being offered outstanding entry points before earnings are released.

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