Sports betting stocks are called out by CBRE for attractive valuation – DKNG
By: Clark Schultz
CBRE Equity Research dove into the value side of investing in U.S. sports betting stocks in a new note posted on Wednesday.
Analyst John DeCree said the value of U.S. sports betting businesses is now dislocated due to the risk-off sentiment in the market.
“While we appreciate the uncertainty of both inflation and rising rates, we believe valuation of most US sports betting businesses overcorrected,” he noted.
**DraftKings (NASDAQ:**DKNG -1.8%) is said to remain the valuation benchmark as the only large cap pure-play, trading at what is seen as a reasonable valuation of 3.2X FY23 revenue. Meanwhile, DeCree thinks the implied valuation of sports betting businesses of competitors like Caesars Entertainment (NASDAQ:CZR -2.7%), MGM Resorts (NYSE:MGM -1.0%), Penn National Gaming (NASDAQ:PENN -2.0%), Flutter Entertainment (OTCPK:PDYPY -2.5%) and Entain (OTCPK:GMVHF) are low and should be decoupled from other high-growth sector sell-offs for two important reasons.
“First, gaming companies are very profitable with substantial FCF, which should make the equities less susceptible to rising interest rates relative to unprofitable growth companies. Second, the US OSB/iGaming is an entirely new industry with years of growth ahead, unlike other tech sectors that benefited primarily from state-at-home orders during the pandemic and are now normalizing.
Looking down the road, a FanDuel listing is seen as a potential valuation catalyst for the entire industry if things normalize during the second half of the year and Flutter (OTCPK:PDYPY) sets it free.
Submitted March 23, 2022 at 03:26PM by Street_Country_1266
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