Last updated: October 06, 2023
Weeks after being announced as an official betting partner of the NFL, DraftKings stock slumps, but Guggenheim sees a positive upside. Analysts are backing the company to recover from the stale period.
Curry Baker, an analyst at Guggenheim, has sparked a discussion around the sportsbook operator after labelling DraftKings a “buy” rating and a $75 price target. The Guggenheim analyst purchase rate is just higher than the Wall Street stance of $73.27.
However, this implies that a possible upside of 30.5% from the closing price on 29 April.
Curry Baker is forecasting a solid response for the DraftKings stock, noting that the North American online sports betting and online casino markets have the potential to be worth $70 billion.
If the combined markets reach that value, DraftKings will hold a decent portion of the market through their estimated 20-30% market share.
Baker said that reasonable legalization and market share assumptions were considered when the company sought to estimate the revenue outlook for DraftKings. An outlook that suggested plenty of positives at $7.6 billion to $10.6 billion.
This certainly would be a bullish commentary for DraftKings, currently sitting 23.6% below its 52-week high. For perspective, a drop of 20% or more from recent highs is considered a bear market.
The online sports betting and casino markets are highly competitive, especially with favorable legislative environments as more states adopt a pro online gambling stance.
Concerns among investors are focused on the company’s high marketing spend while losing market share in some of their marquee states. This is despite DraftKings being the second-largest online sportsbook in the USA.
Gross gaming revenue share for DraftKings in the vital internet casino and sports betting markets is trending below the six to twelve-month averages for those markets. A question is being asked about whether BetMGM’s emergence in the market during this time and BetMGM’s heavily aggressive stance towards bonusing strategies have had a considerable impact on the averages.
Despite the slump, Guggenheim analyst Curry Baker is backing the catalysts for an upside to the stock, with 70% of the population in the USA having access to legal and regulated online sports betting by 2025.
Marketshare will continue to be a problem as the space grows, but the catalyst for DraftKings has been its cross-selling success.
DraftKings currently has a paid daily fantasy sports player base of approximately 5 million. This userbase gives them a significant target when new states regulate online sports betting.
Currently, more than 60% of these daily fantasy sports players have been cross-sold into sports betting and online casino gaming within 18 months of their states launching.
Marilyn Chavez is an associate researcher at the Missouri University of Science and Technology, where she studied the mathematical probabilities and aspects of casino games like slot machines. She’s written several case studies which have been published by multiple problem-gaming institutions to help spread awareness about the dangers of online gambling and gambling addiction. She also presented a 2019 Ted talk on the topic of gambling among minors.
