Investors are showing a keen interest in Non-Fungible Token (NFT) stocks. NFTs are digital assets like art, music, or videos that are created using blockchain technology. Each NFT has a unique digital signature that makes it difficult for NFTs to be exchanged for one another, and no two NFTs can be equal.
NFTs offer content creators a unique way to monetize their content through royalty payments or by selling their art directly to consumers. According to an Al Jazeera report from last month, this year the market for NFTs has surged with $2.5 billion in sales so far, in contrast to sales of just $13.7 million in the first half of last year.
Using the TipRanks Stock Comparison tool, let us compare two companies who have ventured into NFTs, DraftKings and Dolphin Entertainment, and see how Wall Street analysts feel about these stocks.
DraftKings is an online sports gaming and entertainment company that provides its users with a sports betting Sportsbook, daily fantasy sports, and online casino gaming opportunities. DKNG is expected to announce its Q2 results on August 6.
Late last month, DKNG announced its plans to launch DraftKings Marketplace, an ecosystem of digital collectibles that would offer curated NFT drops and support secondary-market transactions. The company has also entered into a strategic relationship with Autograph, an NFT platform. As a result, the DraftKings Marketplace will also be the exclusive distributor of NFT content from Autograph.
Autograph is an NFT platform that lists its co-founders as football legend Tom Brady, and has other sports stars like Tiger Woods and Naomi Osaka on its advisory board. (See DraftKings stock chart on TipRanks)
DraftKings co-founder and president Matt Kalish said, “DraftKings Marketplace will sit at the center of this technological and cultural phenomenon, providing our immense existing customer base with an easily accessible experience that rivals all legacy marketplaces. This initial vision in collaboration with Autograph, and its coveted collection of official digital collectibles, is a vital first step as we enter the emergent NFT market.”
Initially, DKNG’s marketplace “will be the exclusive purveyor of sports NFTs from Autograph, the collaboration may eventually branch into other verticals like entertainment, lifestyle and culture.”
Following the NFT marketplace announcement, Oppenheimer analyst Jed Kelly reiterated a Buy and a price target of $80 (63.3% upside) on the stock. Kelly viewed the venture into the NFT marketplace as a favorable one and said, “Creating an NFT marketplace supports our sports entertainment platform thesis and reduces regulatory dependence.”
The analyst also added that DKNG could “leverage its sports-centric data-base of 5M that is much larger than other digital collectible exchanges.”
Furthermore, Kelly is of the opinion that the NFT marketplace could help DKNG “hedge revenue from downside scenarios related to regulation.”
DKNG’s online gaming and sports betting business is highly regulated and according to analyst Kelly, U.S. states are slow to regulate sports betting. That could prove to be a downside risk for the stock. According to the analyst, another risk to the stock is that live betting adoption among consumers is low.
On the other hand, DKNG’s NFT marketplace could result in higher engagement from its existing user base and provide cross-selling opportunities.
Turning to the rest of the Street, consensus is that DKNG is a Moderate Buy, based on 13 Buys and 6 Holds. The average DraftKings price target of $65.29 implies an approximately 33.2% upside potential to current levels.
Dolphin Entertainment is an independent entertainment marketing and premium content development company that provides strategic marketing and publicity services to major film studios and independent digital content providers.
Yesterday, the company’s stock popped 55.8% to close at $12.22 after a Variety report said that Dolphin will partner with West Realm Shire Services, owner and operator of FTX.US, to create an NFT marketplace for major sports and entertainment brands.
Through the agreement, Dolphin will develop and execute the production, creative branding, and marketing of these programs, while FTX will use its crypto exchange services and technical know-how about cryptocurrencies.
Dolphin and FTX will together develop and program global NFT marketplaces, targeting brands within the sports, film, television, music, gaming, eSports, culinary, lifestyle, and charity industries.
Early last month, a call took place between Dolphin’s CEO Bill O’Dowd and Maxim Group analyst Allen Klee. In the call, the CEO had indicated that the company is looking at opportunities to own content that could be supported with marketing and promotions, and could drive long-term profitability for the company.
In April this year, the company had unveiled its Dolphin 2.0 strategy as a part of which the company “will own (by ourselves and with partners) content, live events and consumer products which we are marketing.”
To achieve this objective, in March, Dolphin formed an NFT division to design, produce, release and promote NFTs for itself and its clients. The company has already entered into an NFT partnership with Hall of Fame Resort & Entertainment Company (HOFV), with its initial NFT offerings centered around professional football. (See Dolphin stock chart on TipRanks)
Along with the HOFV partnership, Dolphin has partnered with the South Beach Wine and Food Festival for an NFT collection from artist Romero Britto. The company has also entered into a new NFT category, Culinary, to produce an NFT Collectible Recipe Card system which will partner with top chefs, including chefs Nina Compton and Hugh Acheson.
Analyst Klee projects revenue growth of over 30% annually and improved bottom-line performance this year and the next. Growth will be driven by the re-opening of the economy and Dolphin’s end markets, cross-selling opportunities, and a rise in streaming content.
The analyst added, “For 2022, we expect double-digit organic growth from cross-selling and additional contributions from production content, NFTs and other businesses they plan to own. As a result, for 2022, we project revenue of $44.4M, up 40% y/y [year-over-year] and adjusted EBITDA of $7.7M, representing a 17.3% margin.”
Maxim Group analyst Allen Klee is the only one to have rated the stock in the past 3 months. He has a Buy rating with a price target of $28 on the stock. The Dolphin price target of $28 implies an approximately 129.1% upside potential to current levels.
While analysts are cautiously optimistic about both stocks, based on the upside potential over the next 12 months, Dolphin seems to be a better Buy.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.