DraftKings Inventory Provides Main Upside, Says Guggenheim Analyst


Posted on: April 30, 2021, 10:10h. 

Final up to date on: April 30, 2021, 10:35h.

DraftKings (NASDAQ:DKNG) inventory is mired in a hunch. However that’s not stopping some analysts from sticking with or beginning new bullish outlooks on the title.

DraftKings stock
A DraftKings sign up Boston. Guggenheim analyst Curry Baker sees massive upside for the inventory. (Picture: Boston Globe)

Guggenheim analyst Curry Baker initiated protection of the sportsbook operator immediately with a “purchase” score and a $75 value goal. That’s barely above the Wall Road consensus of $73.27, however nonetheless implies potential upside of 30.5 p.c from the April 29 shut. In what’s one of many rosier forecasts up to now, Baker says the mixed North American iGaming and on-line sports activities betting markets might ultimately be price $70 billion, with DraftKings commanding a large chunk.

We’ve got utilized, in our opinion, cheap legalization and market share assumptions to every of those [total addressable markets] to derive our long-term North American income outlook for DraftKings of $7.6 billion to $10.6 billion,” stated the analyst in a notice to purchasers.

That’s cheery commentary on DraftKings, which is off 5.80 p.c over the previous month and resides 23.60 p.c under its 52-week excessive. Declines of 20 p.c or extra from latest highs are thought-about bear markets.

Causes for Concern with DraftKings Inventory

Over the previous yr, sports activities betting equities rallied as extra states legalized the exercise, with Wall Road incessantly citing a positive legislative surroundings as a main catalyst for shares resembling DraftKings.

Nevertheless, the market stays fiercely aggressive. Whereas the Boston-based firm is the second-largest on-line sportsbook operator within the US, behind solely FanDuel, and enjoys superior model recognition, some traders fear the corporate’s advertising spending is simply too excessive. That’s whereas market observers see proof DraftKings is dropping market share in some marquee states.

DraftKings’ gross gaming income (GGR) share in latest months in very important web on line casino and sports activities wagering markets “is trending at or under its trailing 6-12 month averages in these markets, per our estimates. We wonder if the emergence of BetMGM (and its aggressive bonusing technique) over that very same time interval has had a significant impression — and the way lengthy such an impression would possibly final,” stated Eilers & Krejcik in the newest version of its bi-weekly EKG Line report.

DraftKings Nonetheless Has Catalysts

Baker, the Guggenheim analyst, forecasts 70 p.c of the US inhabitants accessing regulated on-line sports activities betting by 2025 – an apparent catalyst for equities resembling DraftKings. Whereas considerations about market share are unlikely to dissipate over the near-term, the corporate has avenues for successfully including new bettors.

“DraftKings has a paid each day fantasy sports activities (DFS) person base of ~5 million distinctive paid prospects, which give a right away cohort to focus on when a brand new state launches. Over 60% of lively DFS gamers have been cross-sold into on-line sports activities betting or iGaming through the first 12-18 months of a brand new state launching,” stated Baker.

DraftKings inventory may very well be propelled by different catalysts, together with the corporate’s efforts to bolster its expertise stack and its transfer into the media realm. Each jibe with its efforts to change into a vertically built-in operator.

“Past the momentum in the direction of legalization and the inherent tailwinds new states/markets provide, we see a number of different aggressive benefits underpinning our optimistic outlook for DraftKings,” stated Guggenheim’s Baker.

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