DKNG, BYD or LVS: Analyzing the Best Entertainment Stock to Buy

The entertainment industry is flourishing with the rise of online consumerism, worldwide gambling legalization, and seamless esports integration. Therefore, let's look into Boyd Gaming Corporation (BYD), Las Vegas Sands Corp. (LVS), and DraftKings Inc. (DKNG) to assess their prospects.

Before delving into the fundamentals of the featured stocks, let's examine the key factors driving the entertainment industry’s prospects.

The global quarantine induced a profound transition to online consumerism, transforming operational landscapes across industries. The entertainment sector faced distinct challenges, prompting innovative responses. That said, resorts are now pioneering advancements through super-apps, wearables, augmented reality, virtual reality, and other transformative technologies.

Casinos are also evolving into multifaceted entertainment hubs, extending their allure beyond gamblers. They are curating comprehensive entertainment packages, captivating guests with distinctive dining experiences and star-studded live performances by renowned artists, redefining their identity to attract a diverse clientele.

The ongoing legalization of gambling and the burgeoning experience economy globally are also propelling the sector’s expansion. Licensed casinos are venturing into new markets, achieving unprecedented revenue records. Notably, the U.S. casino sector anticipates surpassing last year's $60 billion, marking its most lucrative year ever in terms of gambler winnings.

American Gaming Association (AGA) President and CEO Bill Miller said, “The significant expansion and record demand for legal, regulated gaming in the post-pandemic era have allowed our members to consistently invest in our product and people to deliver innovative entertainment options for American adults.”

Moreover, Esports has emerged as a global phenomenon, captivating millions of fans worldwide. Recognizing its potential, casinos integrate esports and gambling seamlessly, offering an unparalleled entertainment experience. The rise of esports betting is a notable trend, attracting a younger clientele to casinos and reshaping the industry landscape.

Now, let's assess which Entertainment - Casinos/Gambling stock is poised for growth, which is advisable to hold, and which stock faces challenges despite the industry tailwinds.

Stock to Buy:

Boyd Gaming Corporation (BYD)

BYD is a dynamic gaming company that oversees 28 gaming entertainment properties spread across ten states. It operates through three segments: Las Vegas Locals; Downtown Las Vegas; and Midwest & South. Beyond gaming, the company extends its reach by owning and operating a travel agency.

The stock's trailing-12-month gross profit margin of 69.74% is 95.3% higher than the industry average of 35.71%. Its trailing-12-month EBITDA margin of 34.77% is 214.9% higher than the 11.04% industry average. Also, BYD’s trailing-12-month net income margin of 18.89% is 324.1% higher than the 4.45% industry average.

For the fiscal third quarter that ended September 30, 2023, BYD’s revenues from Food & beverage increased 4.7% year-over-year to $70.99 million while total revenues grew 3% from the prior year’s period to $903.16 million. In addition, the company registered adjusted earnings and adjusted EPS of $137.28 million and $1.36, respectively for the quarter.

Analysts expect BYD’s revenue to increase 4.3% year-over-year to $3.71 billion for the fiscal year ending December 2023. Likewise, the company's EPS for the current year is expected to grow 2.2% from the prior year to $6.20. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.

The stock has gained 7.4% over the past month to close the last trading session at $58.92.

BYD’s sound fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

BYD has an A grade for Quality and a B for Value. It has ranked #6 in the 25-stock Entertainment - Casinos/Gambling industry.

In addition to the POWR Ratings I've just highlighted, you can see BYD’s Growth, Momentum, Sentiment, and Stability ratings here.

Stock to Hold:

Las Vegas Sands Corp. (LVS)

LVS is a global developer of destination properties that orchestrates Integrated Resorts. These venues encompass accommodations, gaming, entertainment, retail malls, and celebrity chef restaurants. The company's primary operational and developmental focus spans two key regions: Macao and Singapore.

LVS’ trailing-12-month EBITDA margin of 30.22% is 173.7% higher than the industry average of 11.04%. However, the stock's trailing-12-month ROTC of 4.81% is 20% lower than the 6.01% industry average. Also, its trailing 12-month asset turnover ratio of 0.39x is 60.4% lower than the 0.99x industry average.

For the third quarter that ended September 30, 2023, LVS’ net revenues increased 178.1% year-over-year to $2.80 billion. Its adjusted net income and adjusted EPS from continuing operations attributable to LVS stood at $418 million and $0.55, respectively, compared to an adjusted net loss and loss per share of $208 million and $0.27 in the prior year’s period.

However, as of September 30, 2023, the company’s cash and cash equivalents came in at $5.57 billion, compared to $6.31 billion as of December 31, 2022. Moreover, its current assets amounted to $6.17 billion, down from $6.74 billion as of December 31, 2022.

The consensus revenue estimate of $10.36 billion for the fiscal year ending December 2023 reflects a 152.1% year-over-year improvement. Also, the company is expected to report earnings per share of $1.90 for the current year. Shares of LVS have gained 1.5% over the past year to close the last trading session at $45.34.

LVS’ prospects are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system.

LVS has a C grade for Momentum and Stability. It is ranked #8 out of 25 stocks within the Entertainment - Casinos/Gambling industry.

Click here to access the additional LVS ratings (Growth, Value, Sentiment, and Quality). 

Stock to Sell:

DraftKings Inc. (DKNG)

DKNG offers an array of services encompassing online sports betting, casino activities, daily fantasy sports, media, consumer products, and retail sportsbooks. Additionally, the company participates in the design and development of cutting-edge sports betting and casino gaming software for both online and retail sportsbooks.

The stock's trailing-12-month levered FCF margin of 1.76% is 65.8% lower than the industry average of 5.15%. In addition, its trailing-12-month CAPEX/Sales of 0.98% compare to the 3.14% industry average. Moreover, DKNG’s trailing-12-moth asset turnover ratio of 0.82x is 17.8% lower than the 0.99x industry average.

DKNG’s loss from operations stood at $286.59 million during the fiscal third quarter that ended September 30, 2023. Its net loss and loss per share attributable to common stockholders came in at $283.10 million and $0.61, respectively.

In addition, as of September 30, 2023, the company’s cash and cash equivalents amounted to $1.11 billion, compared to $1.31 billion as of December 31, 2022. Its current assets came in at $1.97 billion, down from $2.08 billion as of December 31, 2022.

Analysts expect DKNG to report a loss per share of $1.47 for the current year ending December 2023. Moreover, the company’s loss per share for the next fiscal year (ending December 2024) is expected to come in at $0.30. The stock marginally plunged intraday, closing the last trading session at $38.27.

DKNG’s bleak outlook is apparent in its POWR Ratings. The stock has an overall rating of D, translating to a Sell in our proprietary rating system.

DKNG has an F grade for Stability and a D for Value and Quality. It has ranked last within the same industry.

Click here to access additional DKNG ratings for Growth, Momentum, and Sentiment.

What To Do Next?

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LVS shares were trading at $46.17 per share on Thursday afternoon, up $0.83 (+1.83%). Year-to-date, LVS has declined -3.22%, versus a 20.06% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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