Better NFT stocks: DraftKings vs. GameStop

by James · July 3, 2022

At first glance, DraftKings (DKNG 0.86%) and GameStop (GME 0.92%) seems to have little in common. One is a new gaming site, while the other is an established technology retailer working to redefine itself. However, the two discretionary consumer shares have an important common feature – they have hung part of the hope of building an NFT (non-fungible token) marketplace.

NFTs are unique, secure data attributes stored on a distributed ledger. In recent months, they have fallen into disfavor, so much so that these marketplaces can be detrimental to both stocks. Nevertheless, regardless of NFTs, a stock is likely to have more potential.

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The NFT marketplaces

NFTs have increased in popularity in recent years. But according to the industry website NonFungible, interest has dropped significantly. Sales volume fell by almost 50% in the first quarter of 2022.

It is still unclear whether NFTs were a one-time fad or whether they have just encountered a difficult update. But despite the turmoil, both DraftKings and GameStop have moved to this marketplace.

DraftKings has already launched its marketplace. The NFT site specializes in collectibles related to sports, entertainment and culture. It also supports curated NFTs and secondary transactions.

However, GameStop has not launched its NFT site yet, but plans to do so by the end of July. In addition, it intends to target some markets other than DraftKings. It will focus more explicitly on the metaverse and focus on selling blockchain tokens that represent metaverse assets. Digital real estate and weapons used in games are examples of what the marketplace can sell.

Evaluating their potential

Of the two NFT marketplaces, DraftKings’ potential is easier to measure at this point. This is primarily because it is the site that is currently operational, having launched in 2021. Despite its initial status, DraftKings NFTs did not discuss much in its first quarter results report. It also did not publish any economic figures related to this segment.

In addition, most of the NFT-related news focused on links with other parts of the DraftKings ecosystem. Among these offerings was a Primetime NFT series released prior to the NCAA Basketball Tournament, designed to engage.

When it comes to GameStop, the NFT market may be worth seeing when it becomes available. ReportLinker.com predicts a compound annual growth rate of 46% for the metaverse through 2031. Such growth could bode well for GameStop’s NFT marketplace.

Nevertheless, the NFT market will probably have to recover. In addition, GameStop must show that it can execute its NFT strategy effectively if it wants to win over users and investors.

Should investors buy one of the shares based on NFT marketplaces?

In the end, NFT sales have been depressed, and neither DraftKings nor GameStop have proven themselves in the NFT market. Therefore, investors should probably not consider NFTs when buying any of the shares.

Nevertheless, if they are forced to choose one of these NFT-related stocks, it looks like the economy is tipping the decision against DraftKings. Revenue for the first quarter came in at $ 417 million, an increase of 34% year-over-year. Although not as high as 111% growth in 2021, revenue growth will remain at high levels.

In contrast, GameStop’s revenue of $ 1.4 billion grew by 8% in fiscal year 1 (ended April 30), down 18% from revenue growth in fiscal year 2021. Although not a perfect comparison since GameStop’s fiscal year is one month behind DraftKings DraftKings has shown consistently faster revenue growth.

Admittedly, the GameStop stock outperformed DraftKings last year. DraftKing’s price-to-sale (P / S) ratio of 3.5 is also well above GameStop’s sales multiple of 1.5.

GME data by YCharts.

Nevertheless, DraftKings has built an online gaming ecosystem in the emerging online gambling market with fantasy sports, sportsbook and casino games that can take advantage of synergies with an NFT marketplace. As more states legalize online gambling, this ecosystem may serve as the most prominent alternative to visiting a casino.

Conversely, GameStop’s business model is in trouble. The rise of e-commerce and the predominance of online gaming sales have threatened GameStop’s reason for being so. Although it was about online sales and collectibles, these are established businesses where GameStop has no meaningful competitive advantage.

Also, as mentioned earlier, GameStop’s prospects in the NFT industry are uncertain at best. While the same can be said about DraftKing’s NFT business, DraftKings is likely to do better even if none of the companies succeed with non-fungible tokens.