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2 Sports Stocks Poised for a Bull Run

By Parkev Tatevosian - Mar 5, 2021 at 11:20AM

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These two stocks could soar as fans' return to sports stadiums coincides with a wider economic reopening.

Professional sports leagues experienced a wild 2020, and stocks that were dependent on them went along for the ride. First, most major sports leagues paused or canceled all games at the onset of the pandemic. Then they worked on establishing safety protocols that allowed them to restart and complete their seasons near the end of the year. DraftKings (DKNG 11.06%), which offers contests that depend on the outcome of sporting events, suffered a major drop in revenue when leagues paused action. And Disney (DIS 3.29%), which is home to the sports network ESPN, saw revenue fall off at the network. 

Thankfully, coronavirus infections and hospitalizations are on a downward path worldwide. And with 75 million people receiving at least one dose of a vaccine in the U.S., there are hopes of returning to normalcy in the back half of 2021. That could mean stadiums with more fans, although maybe not as many as prepandemic. 

DraftKings and Disney are two stocks poised for a bull run as people get comfortable getting together in person. 

A group of friends drinking beer and cheering sports

Image source: Getty Images.

Disney 

Disney's streaming services, Disney+, Hulu, and ESPN+, are thriving -- spurred on by the surge of demand for in-home entertainment during the pandemic. The three have reached 146.4 million paying subscribers. What's more, management expects this growth to continue over the next several years. By 2024, Disney is estimating it will have over 300 million subs.  

Moreover, Disney has several operations that rely on bringing people together in person. Those businesses are either still closed to the public or operating at reduced capacity. In the last few weeks, coronavirus cases and hospitalizations are decreasing week over week. Further, the pace of vaccinations against the deadly virus is increasing. As of this writing, 242 million people worldwide have received at least one dose of a vaccine. If those positive developments in the fight against the coronavirus continue, Disney could be operating at full strength by the end of 2021.

Already, the sports calendar for 2021 is bringing in stellar results for ESPN. The National Basketball Association, in particular, is experiencing an increase in viewership. According to Nielson Media Research, 34% more people are watching the NBA this season than last. With sports leagues returning to a more normalized schedule after COVID-related disruptions in 2020, and competition from political news retreating, after a heated election season, sports viewership could see substantial gains in 2021. That would be a boon for Disney's media segment, which made up the majority of its operating profits in 2020.

Additionally, with its legacy businesses returning to full strength supplemented by a rapidly growing streaming segment, Disney's stock could be poised to soar

A stock board that has Comeback written on it

Image source: Getty Images.

DraftKings 

DraftKings currently offers mobile sports wagering in 12 states, but that's only about more than half of the 21 states where it has been legalized. As DraftKings expands into more states, its revenue and customer base will jump along the way. Already, DraftKings has 1.5 million monthly active players, which is a 50% increase from the 1 million it had in the year prior.  

DraftKings experienced a major setback at the pandemic's onset when major sports leagues suspended their seasons. Since the company's sports offerings rely on an outcome from sporting events, the lack of them decreased customer engagement and overall revenue. Sports leagues have taken a new approach since then; whenever there is an outbreak of COVID-19 within a team, the league either continues the scheduled game excluding the infected players or delays the game to a future date. Either way, the season rolls on, and fans have something to watch and wager on.  

Revenue increased by 98% in the most recent quarter because of more customers and partly because of a loaded sports schedule. Those will continue to be the twin pillars that lift this stock as it enters into new markets and the receding threat of COVID-19 allows us to get together to watch our favorite teams compete.

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Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$108.64 (3.29%) $3.46
DraftKings Inc. Stock Quote
DraftKings Inc.
DKNG
$13.86 (11.06%) $1.38

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