The economy is slowly reopening. The gradual return to normal includes the resumption of the four major sports leagues. Though there is certainly the potential for one or all of the pro sports leagues to backtrack to an indefinite hiatus in the event that several players contract the coronavirus, measures will be taken to prevent such a scenario. In fact, pro sports players might even be tested for the virus on a daily basis and quarantined as appropriate. All signs point toward the resumption and completion of each of the four professional sports seasons. Shares of DraftKings (DKNG), Penn National Gaming (PENN), World Wrestling Entertainment (WWE) and Madison Square Garden Company (MSG) are poised to move upwards as play resumes.
Gambling in all forms is now socially normative. This is quite the 180 from decades prior when the masses scoffed at the notion of legalizing traditional sports gambling and high-frequency stock market day trading. Today, people are gambling on just about everything from NFL football to electronic sports (esports), the stock market, online cryptocurrency slot machines and even computer-based sports simulations. In particular, fantasy sports have emerged as one of the more popular forms of gambling.
DKNG is not the only fantasy sports business in the game yet it is one of the few fantasy sports service providers that is publicly traded. DKNG appears to have a floor established at $11, reached on March 12. The stock has ascended quite rapidly since this sudden decline spurred by the indefinite halt in professional sports amidst the coronavirus outbreak.
Now that MLB owners have agreed to a July 1 start date and NHL/NBA commissioners insist there will be a conclusion to their respective 2020 seasons, the sky is the limit for DKNG. Look for this stock to soar past its 52-week high of $26 in the weeks to come as professional athletes get back to work.
The Madison Square Garden Company (MSG)
Wouldn’t it be nice to own a piece of a professional sports franchise and sports arena? You can do just that with an ownership share in MSG. MSG’s umbrella includes the New York Rangers and New York Knicks. These teams are on temporary hiatus due to the coronavirus pandemic, they should resume action in the months to come.
Though 40% of the NBA’s revenue and likely an even greater percentage of NHL revenue stems from gate sales, each league’s collective bargaining agreement is likely to be renegotiated to reflect the reduction in revenue caused by the pandemic. However, the decline in revenue is already built into MSG’s current stock price.
MSG has an A POWR Rating Peer Grade, meaning it stands tall amongst the competition. Look for this stock to trend upward as professional sports resume in the near future.
Penn National Gaming (PENN)
Use your mind’s eye to envision how people will respond to the reopening of the economy as the coronavirus dissipates. Senior citizens, baby boomers and members of Generation X will inevitably flock to casinos, racetracks and other gambling facilities.
Though the initial demand for gambling services will be less than that in the weeks leading up to the outbreak, it won’t take long for business to resume as usual at these facilities. After all, plenty of older Americans have $1,200 Trump Bucks to burn. Contrary to popular opinion, a significant amount of this “funny money” will be gambled on the slot machines, the horses and sports rather than spent on necessities. PENN stands to benefit from this influx of cash.
PENN owns racetracks and casinos throughout the United States. This geographically diversified risk has the potential to prove quite important in the event that pockets of COVID-19 emerge after the reopening. Even if the virus rears its ugly head in the south, PENN locations will still be open in other regions.
PENN’s record-setting revenue combined with its bullish options market activity make the stock quite intriguing. PENN’s appeal is even stronger when you consider it has a strong B POWR Ratings Peer Grade.
World Wrestling Entertainment (WWE)
While most private industry operations were shuttered during the coronavirus pandemic, a select few were categorized as essential business. WWE was provided with this coveted classification in the state of Florida, allowing wrestling events to continue while the virus spread throughout the nation. In other words, just about nothing can stop this entertainment juggernaut.
Fresh off a billion dollar deal with FOX, WWE’s stock has declined quite significantly. Though the FOX deal has not worked out as planned due to a rather sudden ratings decline, WWE certainly added to its legions of fans as the only game in town during the COVID-19 outbreak.
WWE’s earnings growth has some convinced it is actually a growth stock in disguise. This is the perfect time to buy low and patiently watch the stock inch upward toward TipRank’s average analyst price target of $50.56.
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DKNG shares closed at $29.23 on Friday, up $3.92 (+15.49%). Year-to-date, DKNG has gained 173.18%, versus a -10.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…