(Bloomberg) -- Churchill Downs Inc. is, at first blush, having quite a year in the stock market. Its 28% gain so far is, by most measures, a formidable return in a year when the pandemic has rocked many companies.
But the truth is, in the world of online gaming, which has boomed as people have sought out new entertainment options amid the rolling lockdowns, the stock is stuck in the middle of the pack, at best. Competitor DraftKings Inc. has surged more than 240% while Penn National Gaming Inc. has more than doubled.
Churchill Downs has been left in the dust amid expectations it will carve out just a small piece of the online betting market and lag competitors including DraftKings and Penn National's Barstool Sports, which have a younger and more devout following.
While the absence of fans at Saturday's Kentucky Derby -- delayed from its usual run in May -- is a blow to Churchill's revenue from its most closely followed event, investors are counting on the company's wagering platforms offering even brighter opportunities for profits. The lost ticket sales from the Derby are a roughly $81 million blow, according to Susquehanna analyst Joseph Stauff, even as he highlighted the Triple Crown event as the next catalyst for Churchill Downs.
Read more: A New Yorker Will Romp in the Kentucky Derby: David Papadopoulos
With shares just off a record close, Wall Street analysts have grown cautious on the stock's potential. Susquehanna's Stauff cut shares to a neutral rating on Aug. 24, warning the company's valuation “is largely geared now to its online division's outperformance this year.” Shares rose as much as 3.5% to touch $178.95 ahead of Saturday's race. The average price target of $175 suggests shares will be little changed over the coming year, according to data compiled by Bloomberg.
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