Goldman Sachs Says DraftKings, Penn Nationwide Can Rebound In 2022


Posted on: December 28, 2021, 01:23h. 

Final up to date on: December 28, 2021, 02:19h.

DraftKings (NASDAQ:DKNG) and Penn Nationwide Gaming (NASDAQ:PENN) — two of this yr’s most repudiated gaming equities — might be massive winners in 2022, in accordance with Goldman Sachs.

Goldman Sachs
Goldman Sachs headquarters in New York. The financial institution says DraftKings and Penn Nationwide may bounce again in 2022. (Picture: Fox Enterprise)

The financial institution just lately printed a listing of 40 shares with common upside potential of 45 % over the following yr. Utilizing name choices, the names in that group may supply a mean return on premium of 197 % over the approaching 12 months, says Goldman.

DraftKings and regional gaming behemoth Penn Nationwide are the gaming shares on the Goldman listing. For traders in these names, the Goldman grouping is related as a result of when the financial institution speaks, market members are likely to hear.

Our previous evaluation has proven Goldman Sachs scores alone have been a statistically important driver of alpha,” a group of Goldman analysts, led by John Marshall, head of derivatives analysis, and Vishal Vivek, fairness derivatives strategist, write. “Goldman Sachs analysts are Purchase rated on these shares, and see a mean 45 % upside over the following yr. However name choices value 15 %, implying 197 % potential return on premium on common.”

The financial institution beforehand opined in bullish trend on Penn, highlighting that inventory earlier this yr as one with important upside potential.

DraftKings, Penn On the lookout for 2022 Redemption

Off the March 2020 coronavirus market lows and into first quarter of this yr, Penn was one of many best-performing home shares — gaming or in any other case. Comparable sentiment applies to DraftKings, which turned a standalone public firm in April 2020.

Nonetheless, each names are being shellacked this yr. Amid issues about market share, buyer acquisition spending, and what might be an more and more lengthy street to profitability, some analysts are souring on DraftKings. The inventory is down nearly 21 % over the previous month, 39.43 % year-to-date, and is 63.14 % under its 52-week excessive.

Nonetheless, it ranks sixth on the Goldman Sachs listing. The financial institution’s value goal on the web sportsbook operator is $63, which means the shares must greater than double to get there. Goldman says choices merchants may generate an nearly 300 % return on premium, primarily based on name contracts buying and selling round $8 if DraftKings runs to the financial institution’s value forecast over the following yr.

DraftKings is drawing criticism from at the least one well-known investor, who sees an prolonged time line to profitability, and says the corporate is overvalued. Broadly talking, sell-side analysts nonetheless just like the inventory, however value targets are coming down in current months.

Penn Believable Rebound Candidate

Penn Nationwide is off 41.17 % year-to-date, and is greater than 65 % under its 52-week excessive. However Goldman is optimistic on the Hollywood operator.

The financial institution has a $99 value goal on the inventory, about double the place it closed immediately. Goldman says Penn calls may generate return on premium of 281 % for choices merchants. The inventory is eighth on the financial institution’s listing.

Some analysts argue that Penn inventory is being punished by one-off exterior components that aren’t commentaries on the corporate’s fundamentals, and that margin administration and growth at regional casinos can proceed in 2022, doubtlessly stoking a rebound.

Supply hyperlink

Leave a reply