In this piece, I have analyzed which of the leading entertainment stocks among Malta-based Esports Entertainment Group, Inc. (GMBL) and Boyd Gaming Corporation (BYD) is poised for gains. After thoroughly evaluating these stocks, I think BYD might be a superior choice for the reasons discussed in this article.

The unprecedented growth of online gambling activities, such as online casinos and betting, has propelled players in the online gambling market to adopt new technologies to survive the competition. The implementation of AR technology is expected to provide online casinos with various options for improving and developing their gaming offerings.

Additionally, technologies such as Blockchain, IoT, and VR are changing everything in every field, including online gambling. Virtual Reality and VR Headsets have gained a lot of popularity in recent years and are a revolutionary addition to the world of online gambling.

The online gambling market is expected to grow to $125.60 billion in 2027 at a CAGR of 9.1%.

Moreover, BYD is a clear winner in terms of price performance, with a 25.9% gain over the past year compared to GMBL’s 99.2% decline. Also, BYD gained 10% year-to-date compared to GMBL’s 98.7% decline.

However, here are the reasons why I think BYD might perform better in the near term:

Recent Developments

On September 13, 2023, GMBL announced that its wholly owned subsidiary, ggCircuit, entered into a groundbreaking partnership with Ghost Gaming and Skillshot Media to establish a first-of-its-kind Scholastic Esports Innovation Center within the Ghost Gaming HQ lab, dedicated to pioneering research and co-developing cutting-edge technology tailored to the evolving needs of school esports programs.

Conversely, on August 16, 2023, BYD declared a quarterly cash dividend of $0.16 per share, payable on October 15, 2023.

On May 5, BYD announced that its Board of Directors had authorized an additional $500 million under the Company’s share repurchase program.

Recent Financial Results

During the fiscal third quarter ended March 31, 2023, GMBL’s net revenue declined 73.4% year-over-year to $4.18 million. Also, its net loss came in at $13.19 million, and net loss per common share came in at $5.76. Also, its operating loss stood at $9.61 million.

On the contrary, BYD’s total revenue increased 2.5% year-over-year to $916.95 million for the second quarter that ended June 30, 2023. Its net income rose 31.1% from the previous-year quarter to $192.45 million. Its adjusted EPS increased 6.8% year-over-year to $1.58.

Past And Expected Financial Performance

Over the past year, GMBL’s revenue declined at 42.5% CAGR. Analysts expect GMBL’s revenue to decline by 60.3% this year and 74.6% in the fourth quarter ended June 2023. However, its EPS is expected to be negative $26.69 this year and negative $2.92 in the fourth quarter ended June 2023.

Conversely, BYD’s revenue increased at a CAGR of 5.8% over the past year. Its revenue is expected to increase 3.8% this year and marginally in the current quarter ending September 2023. Its EPS is expected to be $6.39 this year and $1.47 in the current quarter ending September 2023.

Valuation

GMBL’s forward P/S multiple of 0.26 is lower than BYD’s 1.65. Additionally, GMBL’s forward EV/Sales multiple of 1.30x is lower than BYD’s 2.60x.

Thus, GMBL is relatively more affordable.

Profitability

GMBL’s trailing-12-month gross profit margin of 61.35% is lower than BYD’s 70.55%. In addition, GMBL’s trailing-12-month EBIT margin of negative of 84.07% is lower than BYD’s 28.55%.

Thus, BYD is more profitable.

POWR Ratings

GMBL has an overall rating of D, which equates to a Sell in our proprietary POWR Ratings system. Conversely, BYD has an overall rating of B, translating to a Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. GMBL has a D grade for Quality. Its trailing-12-month CAPEX/Sales of 0.17% is 94.7% lower than the industry average of 3.24%. Its trailing-12-month cash per share of 0.57x is 76.1% lower than the industry average of 2.41x.

On the other hand, BYD has an A grade for Quality. Its trailing-12-month CAPEX/Sales of 9.29% is 186.7% higher than the industry average of 3.24%. Its trailing-12-month cash per share of 2.61x is 8.3% higher than the industry average of 2.41x.

Among the 27 stocks in the Entertainment - Casinos/Gambling industry, GMBL is ranked #27, while BYD is ranked #6.

Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Momentum, Sentiment, and Stability. Get all GMBL ratings here. Click here to view BYD ratings.

The Winner

The growing internet penetration and rise in the use of mobile phones among users for playing online games is increasing the demand for online gambling. Industry players such as GMBL and BYD are well-positioned to capitalize on these industry tailwinds.

However, given GMBL's relatively weak financial performance, and low profitability, its competitor BYD looks poised for better gains.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Entertainment - Casinos/Gambling industry here.   

What To Do Next?

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BYD shares were trading at $59.11 per share on Tuesday afternoon, down $0.86 (-1.43%). Year-to-date, BYD has gained 9.22%, versus a 11.44% rise in the benchmark S&P 500 index during the same period.

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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