Goldman Sachs Says Put Your Money On DraftKings, Penn National

An analyst has singled out two market leaders in the growing online sports betting market.

The Analyst: Goldman Sachs analyst Stephen Grambling upgrades DraftKings Inc DKNG from Neutral to Buy and raises the price target from $45 to $65.

The analyst reiterates a Buy rating on Penn National Gaming PENN and raises the price target from $86 to $124.

The Analyst Takeaways: DraftKings and Penn National Gaming are two gaming stocks that have outperformed the S&P 500 in 2021. Grambling said this can continue as the two companies are market leaders in the still-emerging online sports betting industry.

“We upgrade DKNG based on their sustained market leading position in key states, ability to participate in the economics of single operator states, and presence of national contracts which will allow the to achieve scale sooner than the broader peer group,” Grambling wrote in a note.

Related Link: DraftKings To Launch Super Bowl Prop Bet Show With Bleacher Report

DraftKings and Penn National have national recognition that could make them the biggest winners with additional state legislation for New York, Florida and Texas, said Grambling. Tax benefits to states dealing with budget deficits could continue to be the big story in pushing for additional state legalization in 2021.

Investor sentiment is split with bulls favoring the more internet and media-focused companies like DraftKings and Penn National.

“We see significant potential for the stocks to re-rate closer to consumer internet peers as a network effect begins to take hold and new forms of revenue become visible," the analyst said, highlighting new revenue forms could include media, social/advertising and data.

What’s Next: DraftKings and Penn National's Barstool Sportsbook went live in Michigan over the weekend and the former will also launch its online sports betting in Virginia. DraftKings now has legalized online sports betting in 12 states, which is the most in the industry.

DraftKings will announce fourth-quarter and full-year earnings Feb. 26 before the market opens.

Price Action: Shares of DraftKings are up 6.6% to $54.69 on Tuesday. Shares of Penn National are down 0.6% to $103.39.