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BYD vs PENN: Which Gaming Stock Looks More Promising?

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Despite concerns regarding the ongoing pandemic, the Zacks Gaming industry had an incredible run in the past six months. The industry has gained 40.6% in the time frame compared with the S&P 500’s rally of 16.4%.

Legalization of sports betting outside Nevada has given the industry a new lease of life. The legalization of sports betting in Delaware, Mississippi, New Jersey, New Mexico, West Virginia, Pennsylvania, Rhode Island, Montana, Indiana, Tennessee, Illinois and New Hampshire. Moreover, bettors are now allowed to place wagers through the digital platforms in Connecticut, Kentucky, Michigan, Massachusetts, Maryland, Minnesota, Missouri, Kansas, Louisiana, Oklahoma, South Carolina, California, Oregon, Arizona, Montana, Colorado and other states.

Moreover, improving tourism in Las Vegas, and rising demand for gaming and leisure will continue to drive the industry. Most of the industry players are opting for alternative avenues to expand customer base and business.

In line with the industry’s growth, leading restaurant companies — Boyd Gaming Corporation (BYD - Free Report) and Penn National Gaming, Inc. (PENN - Free Report) — are 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 Performances

Shares of Penn National have skyrocketed 195.3% in the past six months, while those of Boyd Gaming have soared 133.1%.

Since gaming companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. The industry is currently trading at 38.75X compared with the S&P 500’s 17.07X. Boyd Gaming has an edge with a lower trailing 12-month P/E ratio of 16.89X compared with Penn National’s figure of 41.4X.


Earnings History

Boyd Gaming reported beat estimates in three of the trailing four quarters and missed the same once. It has a trailing four-quarter earnings surprise of 13.4%, on average. Meanwhile, Penn National beat estimates twice in the trailing four quarters and missed twice. It has a trailing four-quarter negative earnings surprise of 68.6%, on average.


Boyd Gaming continues to expand portfolio by strengthening current operations and growing through capital investment and other strategic measures. The company extensively depends on acquisitions as a strategy to expand brand presence.

Since the outbreak of coronavirus, Boyd Gaming has been witnessing solid performance by the interactive gaming platform. Thanks to the strategic partnership with FanDuel, the company is optimistic regarding its future in the iGaming industry. During the second quarter 2020, the company launched Stardust brand and social casino to boost footprint in the interactive gaming platform.

In September 2020, the company collaborated with Aristocrat Technologies for the launch of a new digital initiative — B Connected Mobile. The application enhances customer experience and provides seamless access to its range of online, social and mobile gaming brands. It also provides access to Nevada-based sports betting app such as FanDuel, Stardust and B Connected Sports. Meanwhile, the company has initiated the launch of cashless wallet technology in Northern Indiana. Going forward, it plans to integrate the wallet into B Connected mobile, thereby expanding services to additional amenities and Boyd Gaming properties. However, they are subject to regulatory approvals.

Meanwhile, being a leading gaming company in the United States, Penn National is known for its consistent business strategies and strong brand recognition. Notably, the company has expanded presence through various acquisition and divestitures. Even then, Penn National is continues to expand and leverage its brand power.

In February 2020, Penn National reached an agreement to acquire 36% interest in Barstool Sports for nearly $163 million. The company will launch Barstool Sportsbooks across the United Sates in the coming quarters and mobile sports betting app, Barstool Sportsbook. Notably, the partnership provides access to a database of 66 million sports enthusiasts (or Barstool loyalist), out of which 60% are into sports betting while the remaining are avid betters. During third-quarter 2020, the company unveiled Barstool Sports online sports betting app in Pennsylvania. Within first two weeks of the launch, the company acquired a significant number of new customers courtesy of higher promotional allowances.

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 regarding its long-term growth, which will be supported by differentiated omni-channel approach. Going forward, it plans to launch standalone Barstool branded entertainment destinations, thereby acting as a virtual sports books, where sports betting is allowed. It also plans to launch Barstool Sportsbook app and new iCasino products in Michigan, pending final regulatory approval.

Our Take

Our comparative analysis shows that Boyd Gaming has an edge over Penn National in terms of valuation. However, in terms of price performance, Penn National has clearly outperformed Boyd Gaming. Fundamentals of both the companies remain solid.  Taking all the factors into account, we believe Penn National is slightly better positioned than Boyd Gaming at the moment.

Key Picks

Some better-ranked stocks worth considering in the same space include Monarch Casino & Resort, Inc. (MCRI - Free Report) and Red Rock Resorts, Inc. (RRR - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Monarch Casino & Resort has an impressive long-term earnings growth rate of 13%.

Shares of Red Rock Resorts have appreciated 135.1% in the past six months.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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