Overall, non-fungible tokens (NFTs) are essentially digital collectibles that represent various tangible or intangible objects. A handful of examples are paintings, songs, collectible sports cards — even tweets or NBA tickets. That said, since they are essentially certificates of ownership, NFTs allow collectors to buy and sell virtually any digital asset, including one-of-a-kind digital versions of real-world valuables.
According to Reuters, NFT sales surged to more than $2.5 billion in the first six months of 2021, up from just $94 million in 2020. In addition, monthly sales on OpenSea, the largest marketplace for NFTs, reached $3.4 billion in August, an all-time high.
Given the explosion in their popularity, NFTs have sparked significant interest among investors looking for indirect ways to invest in the trend. Therefore today, I’ll introduce three NFT stocks that are well-positioned to benefit from the NFT craze.
Les Borsai, the co-founder of Wave Financial, dismisses the idea of an “NFT bubble,” highlighting the blockchain technology that underlies NFTs. He also points out various ways digital art and collectibles can be monetized. That said, driven by the pandemic and an inflow of NFT minting platforms and markets, it looks like the NFTs are here to stay as it adapts to the creative impulses of a new generation.
With that information, here is a list of three NFT stocks that are primed to gain traction from the NFT frenzy.
Now, let’s dive in and take a closer look at this trio.
NFT Stocks: Dolphin Entertainment (DLPN)
52-Week Range: $3.05 – $32.50
Coral Gables, Florida-based Dolphin Entertainment provides digital entertainment content, strategic marketing and publicity services to corporate and individual clients. That said, the group released second-quarter results in mid-August.
Total revenue increased 66% year-over-year (YOY) to $8.6 million. Net income came in at $1.3 million, or 13 cents per diluted share, compared to a net loss of $2.9 million, or 62 cents per diluted share, in the prior-year quarter. Meanwhile, cash and equivalents ended the quarter at $9.3 million.
On the results, CEO Bill O’Dowd remarked, “Three major financial milestones were achieved this quarter….all together, these 3 milestones show that we are a financially-sound, profitable and growing company.”
Dolphin is among the earliest adopters of NFT technology in the stock market. Recently, Dolphin launched Dolphin Digital Studios, its NFT division that produces, releases, and promotes NFTs both for itself as well as its clients. The company recently forged an NFT partnership with Hall of Fame Resort & Entertainment (NASDAQ:HOFV), with its initial NFT offerings centered around professional football.
Dolphin is also working with West Realm Shire Services, owner and operator of FTX.US, to create an NFT marketplace for major sports and entertainment brands. According to the agreement, Dolphin will develop global NFT marketplaces, primarily collaborating with brands within a range of industries.
Collectively, DLPN shares have almost tripled in value, up more than 255% YTD. And right now, they trade for just above $12. With a market capitalization of about 92 million, Dolphin could still have significant upside potential, driven by cross-selling opportunities and a rise in streaming content. Analysts predict annual revenue growth of more than 30% and improved bottom-line performance in 2021 and 2022. DLPN stock trades at 3.31 times current sales.
52-Week Range: $34.90 – $74.38
DraftKings is one of the best-known names in online sports gaming. The company offers users daily fantasy sports, sports betting and iGaming opportunities. Management is also working on developing sports betting and casino gaming platform software for online and retail sportsbook and casino gaming products.
DraftKings issued Q2 results in early August. Revenue increased 297% YOY to $298 million. It reported a net loss of $306 million, down from a net loss of $520 million in the prior-year quarter.
On Aug. 10, the company launched DraftKings Marketplace, an ecosystem of digital collectibles that allows users to buy and sell digital collectibles. DraftKings is in the process of creating digital collectibles across sports, entertainment and culture markets.
Analysts concur that the NFT marketplace could lead to higher engagement from its existing user base and also provide cross-selling opportunities. It should also help DraftKings hedge revenue from downside scenarios due to regulatory risks associated with its online casino and sports betting services.
Moreover, 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.”
The company has also entered into a strategic relationship with the NFT platform Autograph, becoming the exclusive distributor of its NFT content. Autograph is poised to become a prominent sports NFT player, boasting exclusive rights with Tom Brady, Wayne Gretzky, Naomi Osaka, Derek Jeter and Tiger Woods.
Right now, DKNG stock hovers near $53, and is up 13% so far this year. However, DKNG stock shares have lost more than 2% in the past 12 months. And they currently trade at 20.7 times current sales.
NFT Stocks: Funko (FNKO)
52-Week Range: $5.34 – $27.20
Generally known for its Funko Pop collectible figurines, Everett, Washington-based Funko creates, sources, and sells licensed pop culture merchandise. The company also licenses its properties under the classic evergreen movie release, current TV and video game categories.
Funko announced Q2 results in early August. Total revenue skyrocketed 141% YOY to $236 million. Adjusted net income came in at $21.7 million, or 40 cents per diluted share, compared to an adjusted net loss of $10.2 million, or 20 cents per diluted share, in the prior-year period. Total liquidity soared 96% to $171 million.
On the results, CEO Brian Mariotti remarked, “Our teams delivered the largest top line quarter in Company history. Our teams delivered the largest top line quarter in Company history.”
Furthermore, Funko recently acquired a majority stake in TokenWave, a company that tracks holdings in NFTs. The investment accelerates Funko’s entry into the NFT market and should enhance its pop-culture platform to include digital assets. It also launched its first NFT pack starting from $9.99.
FNKO stock hovers slightly below $19 territory, and is up 78% YTD. Also, the shares are currently sitting on gains of almost 220% over the past year. Forward price-earnings (P/E) and current price-sales (P/S) ratios stand at around 12.80 and 0.80, respectively. The company’s market cap of $953 million suggests Funko could still grow significantly in coming quarters. Thus, interested readers could consider investing around these levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.