Penn National Gaming (PENN) - Get Report shares rose Tuesday after a Needham analyst initiated coverage of the gambling company at buy with a $151 price target, calling the risk-reward balance compelling.
The investment firm estimates that the North America gambling market is an emerging $35 billion opportunity.
"We are bullish on the online sports betting and iGaming total addressable market in the U.S. and see the potential for Penn to take significant, profitable market share on the strength of Barstool's differentiated content-driven customer-acquisition strategy," analyst Bernie McTernan said in a report.
Penn National shares at last check were 5.7% higher at $95.39.
The Needham analyst says the market is still in its infancy, with only 25% of the population having access to online sports betting and 10% with access to iGaming.
"First, Barstool is Penn's customer acquisition strategy; as such, PENN spends significantly less than peers on external marketing," McTernan said.
"Second, Penn will be a net recipient of market access fees in roughly half of the U.S. where it has a regional casino, vs. online-only peers who are net payers."
Shares of DraftKings (DKNG) - Get Report are higher Tuesday as well, after Needham started covering the sports-betting company with a buy rating and $81 price target. The Investment firm also added DraftKings to its Conviction List.
Needham says DraftKings is positioned as a leader in the North America online gambling market.
"Despite mixed results in New York, we see the currently regulatory environment as supportive, which should lead to a significant growth in legislation, a key reason our '22 and '23 estimates are above consensus," analyst McTernan said.
DraftKings shares at last check were 1.1% higher at $59.89.