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Monday, June 5, 2023

DraftKings: Intriguing Catalysts Make this Stock Attractive

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DraftKings (DKNG), a top online sports gambling platform, has been making all the right moves.

The company has been focusing on acquisitions and partnerships to increase its offerings, and propel its growth. DKNG stock is now up by over 40% year-to-date, with the share price hovering over $62.

The online betting platform, which comes with a valuation of more than $25 billion, has benefited from highly impressive Q2 results, and is appearing more and more like a great pick at this valuation. (See DKNG stock charts on TipRanks)

That’s not to say this stock is cheap. The company trades at 16.4 times forward revenue. However, given the growth this stock has shown, and the risk capital that’s going into the market right now, anything is possible these days.

Let’s take a look at a couple of the key catalysts that investors are betting will boost this gambling stock from here. I am slightly bullish on the stock.

GNOG Deal Could Greatly Benefit DKNG Stock

DraftKings announced its plan to acquire Golden Nugget Online Gaming (GNOG) on August 9. This acquisition would be an all-stock transaction valuing GNOG $1.56 billion.

Investors are hoping that the company’s acquisition could further boost DraftKings’ already-impressive growth rate. The deal is expected to add $160 million in revenue to DraftKing’s fast-growing top line.

Another notable aspect investors are focused on is market share. The online gambling market remains increasingly fragmented. By consolidating a key competitor, DraftKings also gains access to the crucial New Jersey, Michigan, and Texas markets. 

Golden Nugget has a strong presence in the New Jersey online gambling industry with over 9% market share. By acquiring GNOG, DraftKings can combine its operations with that of GNOG in Michigan, West Virginia and New Jersey, thereby boosting its gross margins. 

Major Deals for Upcoming NFL Season

The football season in the U.S. can be characterized as nothing less than a massive craze. DraftKings has already prepared itself to make the most of the NFL season, which kicked off on Thursday. 

The company’s platform has over 1.1 million monthly active users. The company has been selected as one of the NFL’s exclusive sports betting partners, while Genius Sports (GENI) has been given the exclusive distributorship of official statistics and sports betting data. 

DraftKings has strategically entered into a deal with Genius Sports, whereby DraftKings will get access to Genius’ data and content, while Genius will get DraftKings’ data-driven advertising tech. 

DKNG has also entered into a deal with Simplebet. Simplebet is a tech company that deals with micro-betting. This deal will allow DraftKings to offer Simplebet’s products and services to its users throughout NFL, MLB, and NCAA tournaments.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, DraftKings stock is a Moderate Buy. Out of 14 analyst ratings, there are 10 Buy recommendations, and four Hold recommendations.

The average DKNG price target is $70.85. The analyst price targets range from a high of $105 per share, to a low of $51 per share.

Bottom Line

Investors are paying up for quality these days. Indeed, the quality of DraftKings’ existing growth has been impressive. Given the company’s various acquisitions and strategic deals of late, there’s a lot to like about the story.

Of course, downside risks should be taken into consideration with this stock. Any number of factors could derail DraftKings’ trajectory and momentum.

However, for now, DraftKings stock looks like it’s on a hot streak. As they say, you never leave the table when you’re on a hot streak.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

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The post DraftKings: Intriguing Catalysts Make this Stock Attractive appeared first on TipRanks Financial Blog.

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