As the NFL season gears up, the spotlight turns not just on the games but also on investment opportunities in gambling-related stocks. DraftKings, a prominent player in the online gambling arena, has particularly piqued the interest of Wall Street, emerging as a leading stock pick for the upcoming football season.
Chad Beynon, a senior gaming analyst at Macquarie Capital, points to DraftKings as the standout choice for investors seeking exposure to the online gambling sector as the NFL regular season kicks off on September 5. Currently trading at approximately $35.33 per share, DraftKings has been assigned a bullish target price of $50 by Macquarie, reflecting significant confidence in its near-term performance.
In a detailed analysis dated August 26 and published by the Las Vegas Review-Journal, Beynon outlines why DraftKings holds the upper hand, especially as the NFL season unfolds. “DraftKings is ideally positioned to benefit from favorable NFL game outcomes, an inherently higher structural hold, and the ongoing momentum in online sports betting and iGaming sectors,” Beynon explains in his research note.
Despite a lagging performance relative to the broader market in 2024, Macquarie Capital sees this as an opportune moment for the stock. The firm anticipates that with the current hold and growth trends, coupled with easier year-over-year comparisons in the upcoming quarters, DraftKings is well-placed to surpass expectations in the latter half of the year.
Overcoming Challenges and Profitability Milestones
DraftKings has recently celebrated a significant financial milestone by posting its first profitable quarter since going public. This achievement marks a turning point, especially after the backlash from a proposed customer surcharge on winning bets meant to offset high operational costs in states like New York and Illinois. The proposal was quickly shelved following widespread criticism and lack of similar moves by competitors, which could have undermined its market standing.
DraftKings and its New York-based rival, FanDuel, dominate the U.S. online gambling market, commanding about 70% of the sports betting handle and over 60% of the internet gambling revenue nationwide. With a market capitalization of $17 billion, DraftKings is a formidable player, though it trails behind FanDuel’s parent company, Flutter Entertainment, which boasts a market cap of $22.8 billion following its recent U.S. public listing.
DraftKings’ Presence and Operations in Nevada
Despite not offering online gambling in Nevada due to regulatory hurdles, DraftKings maintains a significant operational footprint in Southern Nevada. Its Las Vegas office is pivotal, handling customer service, with teams of traders and legal professionals also based there.
MGM Resorts International remains a notable name in the Las Vegas gambling scene with significant online and physical gambling operations. Macquarie Capital remains optimistic about MGM, setting a target share price of $55. Similarly, Caesars Entertainment is also seen favorably with a target price of $52 per share, indicating potential growth in these traditional casino operators alongside online platforms.
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