The entertainment industry has been put under strain amid the macroeconomic headwinds. However, the industry's prospects remain bright thanks to digitalization and technological innovation. So, quality entertainment stock, Canterbury Park Holding Corporation (CPHC) could be worth buying. However, DraftKings Inc. (DKNG) is best avoided, considering its weak fundamentals.
Before delving deeper into the fundamentals of these stocks, let’s discuss what’s happening in the entertainment industry.
According to Statista, total revenue in the entertainment segment is anticipated to expand at a CAGR of 11.4%, resulting in a projected market volume of $53.13 billion by 2027.
The online gambling market is expected to expand at a CAGR of more than 10% until 2032. The growing internet penetration and use of mobile phones to play online games are fueling the demand for online gambling.
On the other hand, traditional brick-and-mortar casinos and entertainment facilities are failing to attract clients as internet gambling platforms and virtual reality gaming experiences grow in popularity.
In addition, shifting legislation and legal constraints in some locations have created substantial barriers for these companies.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
Stock to Buy:
Canterbury Park Holding Corporation (CPHC)
CPHC engages in horse racing, casino, food and beverage, and real estate development businesses. The company operates through four segments: Horse Racing; Casino; Food and Beverage; and Development.
CPHC’s trailing-12-month net income margin of 16.54% is 266% higher than the 4.52% industry average. Its trailing-12-month levered FCF margin of 9.16% is 75.5% higher than the industry average of 5.22%.
For the third quarter of 2023, which ended September 30, CPHC’s total revenue for the quarter was $19.27 million. Also, its net income and EPS came in at $1.14 million and $0.23.
Also, its total current assets came in at $37.41 million for the period that ended September 30, 2023, compared to $30.70 million for the period that ended December 31, 2022.
Shares of CPHC has gained 9% over the past month to close the last trading session at $20.69.
CPHC’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CPHC also has a B grade for Value, Sentiment, Momentum and Quality. It is ranked #8 out of 30 stocks in the Entertainment - Casinos/Gambling industry. Click here for the additional POWR Ratings for Growth and Stability for CPHC.
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.
DKNG’s trailing-12-month EBIT margin of negative 30.12% compared to the industry average of 7.58%. Its trailing-12-month EBITDA margin of negative 24.18% compared to the industry average of 10.91%.
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.
Street expects DKNG’s EPS to come in at negative $1.48 for the year ending December 2023. The stock has lost 7.6% over the past month to close the last trading session at $35.79.
DKNG’s has an overall D rating, equating to a Sell in our POWR Ratings system.
It also has an F grade for Stability and a D for Value, Sentiment and Quality. It is ranked #25 in the same industry. Beyond what is stated above, we’ve also rated DKNG for Growth and Momentum. Get all DKNG ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CPHC shares were trading at $20.69 per share on Thursday morning, up $0.27 (+1.34%). Year-to-date, CPHC has declined -33.19%, versus a 26.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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