DraftKings Inventory Has Recipe for Upside, Says Cowen Analyst
Posted on: Could 3, 2021, 10:07h.
Final up to date on: Could 3, 2021, 12:08h.
DraftKings (NASDAQ:DKNG) inventory is buying and selling modestly greater Monday with the assistance of a sell-side improve.
Cowen analyst Stephen Glagola boosted his ranking on the each day fantasy sports activities (DFS) supplier to “outperform” from “market carry out,” whereas lifting his value goal on the identify to $70. That suggests upside of 23.5 p.c from the April 30 shut. In his new enthusiasm for the inventory, Glagola cites a well-recognized catalyst.
Present legalization traits counsel to us that the 2H:21-FY22 interval stays strong, and will lead to DKNG being dwell in states representing as much as 51.2% of the grownup inhabitants by 2022 finish,” he mentioned in a observe to shoppers.
Glagola is the second analyst up to now two buying and selling days to come back to the rescue of DraftKings inventory. The identify is mired in what’s now a prolonged hunch. The shares misplaced 7.61 p.c in April and reside 23.21 p.c under the 52-week excessive notched in March.
For DraftKings Inventory, Market Share Issues
Within the fiercely aggressive on-line sports activities betting business, the place operators comparable to DraftKings spend closely to accumulate clients, analysts and buyers are scrutinizing how effectively these expenditures repay by way of market share.
Broadly talking, DraftKings is adept at establishing share. Though it loses cash and is unlikely to be worthwhile previous to 2022 or 2023, it’s the second-largest US on-line sportsbook operator, behind solely FanDuel.
“In Q1:21, we’ve seen state-by-state market focus solidify across the high 4 operators, the place collective OSB deal with share exceeded 90% in West Virginia (99.7 p.c), Indiana (92.5 p.c), Iowa (92.9 p.c), Illinois (98.3 p.c), Michigan (90.6 p.c), and Virginia (99 p.c),” mentioned Cowen’s Glagola, stating this development is a constructive for DraftKings.
Nonetheless, there’s concern that DraftKings is probably weak to ceding the quantity two spot to BetMGM. The 50/50 three way partnership between MGM Resorts Worldwide (NYSE:MGM) and Entain Plc (OTC:GMVHY) is quick including market share in marquee states. It’s aiming for a 20 p.c to 25 p.c general share of the North American iGaming and sports activities betting segments.
DraftKings Making Strikes
Analysts and buyers primarily view DraftKings by the lens of on-line sports activities wagering. Whereas that take is correct, the operator has different traits that might make it interesting to buyers over the long-term.
DraftKings is seen as a possible power on the planet of in-game betting. The idea hasn’t taken off but within the US, however one analysts anticipate will morph into a significant progress alternative for operators within the years forward.
Moreover, the Boston-based firm has its expertise operation — SBTech — in home, defraying prices related to farming that enterprise out to third-party distributors. DraftKings can also be utilizing acquisitions to maneuver additional into the media realm, strikes that diversify its product portfolio and income stream whereas presumably reducing buyer acquisition prices.