Better NFT Stock: DraftKings vs. GameStop

At first glance, DraftKings (DKNG 0.86%) and Game Pause (GME 0.92%) They seem to have very little in common. One is a thriving online gaming site, and the other is a well-established tech retailer trying to redefine itself. However, the two consumer-optional stocks have one important thing in common – they have pinned some of their hopes on creating an unchangeable token (NFT) market.

NFTs are unique, secure data attributes stored in a distributed ledger. They’ve fallen out of favor in recent months, so much so that these marketplaces could hurt both stocks. Still, regardless of NFTs, a stock will likely emerge with more potential.

NFT marketplaces

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

It remains unclear whether NFTs are a one-off fashion or if they face a tough patch. But despite the turmoil, both DraftKings and GameStop have moved on to enter this market.

DraftKings has already launched its market. The NFT site specializes in sports, entertainment and cultural related collections. It also supports curated NFTs and secondary transactions.

In contrast, GameStop has yet to launch the NFT site, but plans to do so by the end of July. It also aims to target some different markets than DraftKings. It will focus more clearly on the metastore and emphasize the sale of blockchain tokens that represent metastore assets. Digital real estate and weapons used in games are examples of what its market can sell.

Evaluating their potential

Of the two NFT markets, it is now easier to gauge the potential of DraftKings. This is mainly because the site is currently operational and launching in 2021. Despite the first move situation, DraftKings did not extensively discuss NFTs in its first-quarter earnings report. It has also not released any financial figures for this segment.

Additionally, most of his NFT-related news has focused on connections with other parts of the DraftKings ecosystem. Among these offerings was a Primetime NFT Series that was released prior to the NCAA basketball tournament and was designed to increase participation.

As for GameStop, it might be worth watching once the NFT market launches. ReportLinker.com projects a compound annual growth rate of 46% for the metaverse through 2031. This kind of growth could bode well for GameStop’s NFT market.

Still, the NFT market will likely have to recover. In addition, GameStop will have to demonstrate that it can effectively implement the NFT strategy if it wants to win users and investors.

Should investors buy both stocks based on NFT marketplaces?

Eventually, NFT sales stagnated and neither DraftKings nor GameStop could establish themselves in the NFT market. Therefore, investors should probably not consider NFTs when purchasing either stock.

However, financials seem to be leaning the decision towards DraftKings if it has to pick one of these NFT-related stocks. Q1 revenue was $417 million, up 34% year over year. While not as high as the 111% growth in 2021, revenue growth remains high.

By contrast, GameStop’s $1.4 billion revenue was down 8% in its fiscal first quarter (ending April 30), down from 18% revenue growth in fiscal 2021. While not a perfect comparison as GameStop’s fiscal year is one month, behind DraftKings, DraftKings has consistently exhibited faster revenue growth.

Admittedly, GameStop stock has outperformed DraftKings over the past year. Also, DraftKings’ price-to-sell (P/S) ratio of 3.5 is well above GameStop’s sales multiplier of 1.5.

GME data by YCharts.

With that, DraftKings has created an online gaming ecosystem with fantasy sports, sports betting and casino games that could benefit from synergies with an NFT marketplace in the burgeoning online gambling market. As more states legalize online gaming, this ecosystem may be the most important alternative to visiting a casino.

Conversely, GameStop’s business model is in trouble. The rise of e-commerce and the dominance of online game sales have threatened GameStop’s raison d’etre. Despite evolving into online sales and collectibles, these are established businesses for which GameStop does not have a meaningful competitive advantage.

Also, as previously stated, GameStop’s prospects in the NFT business are unclear at best. While the same can be said for the DraftKings NFT business, DraftKings will likely do better even if no company has ever succeeded with immutable tokens.

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