DraftKings Inventory Presents Main Upside, Says Guggenheim Analyst
Posted on: April 30, 2021, 10:10h.
Final up to date on: April 30, 2021, 03:34h.
DraftKings (NASDAQ:DKNG) inventory is mired in a droop. However that’s not stopping some analysts from sticking with or beginning new bullish outlooks on the identify.
Guggenheim analyst Curry Baker initiated protection of the sportsbook operator at the moment with a “purchase” score and a $75 worth goal. That’s barely above the Wall Road consensus of $73.27, however nonetheless implies potential upside of 30.5 % from the April 29 shut. In what’s one of many rosier forecasts thus far, Baker says the mixed North American iGaming and on-line sports activities betting markets may 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,” mentioned the analyst in a observe to shoppers.
That’s cheery commentary on DraftKings, which is off 5.80 % over the previous month and resides 23.60 % beneath its 52-week excessive. Declines of 20 % or extra from current highs are thought-about bear markets.
Causes for Concern with DraftKings Inventory
Over the previous 12 months, sports activities betting equities rallied as extra states legalized the exercise, with Wall Road steadily citing a positive legislative surroundings as a main catalyst for shares reminiscent of 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 buyers fear the corporate’s advertising and marketing 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 current months in important web on line casino and sports activities wagering markets “is trending at or beneath its trailing 6-12 month averages in these markets, per our estimates. We ponder whether the emergence of BetMGM (and its aggressive bonusing technique) over that very same time interval has had a serious influence — and the way lengthy such an influence may final,” mentioned Eilers & Krejcik in the latest version of its bi-weekly EKG Line report.
DraftKings Nonetheless Has Catalysts
Baker, the Guggenheim analyst, forecasts 70 % of the US inhabitants getting access to regulated on-line sports activities betting by 2025 – an apparent catalyst for equities reminiscent of DraftKings. Whereas issues about market share are unlikely to dissipate over the close to time period, 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 offer a direct 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 in the course of the first 12-18 months of a brand new state launching,” mentioned Baker.
DraftKings inventory could possibly be propelled by different catalysts, together with the corporate’s efforts to bolster its know-how stack and its transfer into the media realm. Each jibe with its efforts to develop into a vertically built-in operator.
“Past the momentum in direction of legalization and the inherent tailwinds new states/markets supply, we see a number of different aggressive benefits underpinning our optimistic outlook for DraftKings,” mentioned Guggenheim’s Baker.