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Boyd Gaming (BYD) or Penn National (PENN): Which is the Better Stock?

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Zacks Equity Research
·5 min read
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The past one year has been a tough one for the Gaming industry. Low visitation, and dismal Macau and Las Vegas revenues due to the coronavirus pandemic have negatively impacted the industry. However, gradual reopening of the economy has been instilling investor confidence. Meanwhile, the roll out of coronavirus vaccine fuels further optimism.

Most of the gaming companies are focusing on sports betting expansion. Some of the popular igaming applications include DraftKings, Barstool, FanDuel, BetMGM, BetRivers, Fox Bet and BetMonarch. Markedly, the applications have been an important medium for gamers to connect, learn and inspire others. We believe sports betting market is likely to witness sharp growth in the days ahead.

In line with the industry’s growth, industry players — Boyd Gaming Corporation BYD and Penn National Gaming, Inc. PENN — have been trying out different strategies to generate profits. With both the companies carrying a Zacks Rank #3 (Hold), let’s analyze and find out which is poised better with respect to different parameters.

Price Performance

Shares of Boyd Gaming have soared 96% in the past six months, while the same for Penn National Gaming has surged 64.4%. In the same frame, the industry has rallied 44.1%. Clearly, Boyd Gaming has outperformed both the industry and Penn National Gaming on this front.

Since the outbreak of coronavirus, Boyd Gaming’s interactive gaming platform has been witnessing solid performance. Courtesy of the strategic partnership with FanDuel, the company is optimistic regarding its future in the iGaming industry. In 2020, online gaming contributed more than $10 million in EBITDAR on the back of FanDuel's mobile sports operation in Pennsylvania, Illinois, Indiana, and Iowa. For 2021, the company expects EBITDAR to be more than $20 million. Moreover, it anticipates contributions from the to-be-launched Stardust iCasino in Pennsylvania.

Earnings History & Projected Growth

Boyd Gaming reported beat estimates in three of the trailing four quarters and missed once, the average surprise being 21.7%. Meanwhile, Penn National Gaming missed the consensus mark in twice in the trailing four quarters and beat the same in the remaining two. The company has a trailing four-quarter negative earnings surprise of 6.2%. Boyd Gaming has an impressive 2021 earnings growth rate of 1,506.7%, while Penn National Gaming has 2021 growth rate of 133.4%. This round clearly goes to Boyd Gaming.

Fundamentals

Boyd Gaming continues to expand portfolio by strengthening current operations and growing through capital investment and other strategic measures. Meanwhile, the company continues to make solid progress with respect to its expansion in Northern California. Currently, it is working on Wilton Rancheria resorts, which is the closest Class 3 casino to Downtown Sacramento in the South Bay area. The company expects to inaugurate the property by the second half of 2022.

The company has also been undertaking efforts to expand online betting offerings. One of its notable initiatives came following the legalization of sports gambling. During the second quarter of 2020, the company expanded its partnership with FanDuel Group, which includes retail sports books at seven Boyd properties, mobile sports betting apps in Pennsylvania and Indiana, and the online gaming site in Pennsylvania. During the third quarter of 2020, the company continued to expand its partnership with FanDuel Group, which led to launch of mobile sports betting products in Illinois and Iowa. Going forward, the company is optimistic about online gaming prospects in Louisiana, Kansas, Missouri and Ohio.

Meanwhile, Penn National, a leading gaming company in the United States, is renowned for its consistent business strategies and strong brand recognition. Various buyouts and divestitures have helped the company in strengthening its presence. Notably, Penn National Gaming still comtinues to expand and leverage its brand power.

On Jan 22, 2021, the company unveiled Barstool Sports online sports betting app in Michigan. Notably, it witnessed solid demand and acquired a significant number of new customers on the back of Barstool media partnership tools. With respect to the Barstool Sportsbook app in Pennsylvania, the company witnessed solid momentum during the fourth quarter on the back of strong retention, CRM efforts and creative promotions.

Despite the coronavirus pandemic, the company announced that it will continue to invest in projects, which will generate EBITDA in the short term. The company remains confident about its long-term growth, which will be supported by differentiated omni-channel approach. Moreover, Penn National Gaming continues to evolve toward the new generation of cordless, cashless and contactless technology, collectively known as 3C’s. Amid the ongoing pandemic, such initiatives have been instrumental in improving efficiency and customer service, thereby boosting the top line. Going forward, the company plans to launch the 3C's across its casinos in Pennsylvania. It also plans to roll-out in other regions, subject to regulatory approvals.

Our Take

Our comparative analysis shows that Boyd Gaming has an edge over Penn National Gaming in terms of price performance and 2021 earnings growth. Fundamentals of both the companies are solid. We believe Boyd Gaming is slightly better placed in comparison to Penn National Gaming.

Key Picks

Some better-ranked stocks worth considering in the same space include Corsair Gaming, Inc. CRSR and Golden Entertainment, Inc. GDEN. Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Corsair Gaming have gained 85.4% in the past six months.

Golden Entertainment earnings in 2021 are likely to witness growth of 97.3%.

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