Some Analysts are Bullish on DraftKings – Should You Be?

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Written By Marcus Reynolds

DraftKings (NASDAQ: DKNG) stands out as a promising investment as it approaches its fiscal Q1 earnings release. Despite analysts’ upward revisions, there remains a conservative outlook that may not fully capture the company’s growth trajectory, particularly with upcoming events like March Madness and the expansion into the North Carolina market.

Is DraftKings Primed for a Big Rally?

These factors could propel DraftKings to new heights, challenging the current consensus that anticipates a seasonal dip in revenue and a deceleration in year-over-year growth. This underestimation overlooks the potential revenue spike from March Madness—one of the top five betting events in 2024—and the strategic opening of DraftKings’ sportsbook in North Carolina, a significant new market for online gambling.

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March Madness is not just a sporting event; it’s a revenue-generating powerhouse for sportsbooks, with DraftKings poised to benefit greatly. The integration of in-game betting and the creation of parlays, which compile multiple bets into one, not only increases the excitement for bettors but also improves the hold rates for sportsbooks, enhancing their profitability.

The Lucrative North Carolina Market

The timing of DraftKings’ launch in North Carolina is particularly noteworthy. The state, which recently embraced online gambling, represents a lucrative market.

North Carolina’s passion for basketball, underscored by its ranking as a top-six market for sports betting and home to two of WalletHub’s top basketball cities, sets the stage for DraftKings’ success.

Initial data from GeoComply showing over 5.25 million geolocation checks in North Carolina within the first 48 hours of live betting underscores the market’s potential.

The optimism around DraftKings is mirrored in analyst sentiments and price target adjustments. Over the past year, the sentiment has shifted from Hold to Moderate Buy, nearing Strong Buy territory.

Although the consensus price target still trails the stock’s current price, it has doubled over the past year, with recent revisions suggesting potential gains between 6% to 18%. Barclays’ upgrade to Overweight and a price target of $50 signals confidence in DraftKings’ continued growth and market expansion potential.

DraftKings Has Strong Institutional Support

Concerns regarding insider selling have been alleviated by the strong institutional support for DraftKings. Despite the increase in insider sales, over 55% of the company’s shares remain in the hands of insiders and major shareholders. Meanwhile, institutional interest has grown, with institutions holding about 40% of DraftKings’ stock.

This broad base of over nine hundred investing organizations, including major holders like BlackRock and Vanguard, underscores the bullish outlook for the stock.

DraftKings is Positioned for Continued Success

DraftKings is currently experiencing an uptrend in its stock price, suggesting further potential for growth. While there might be short-term resistance, the anticipation of the Q1 earnings report and positive market dynamics could see the stock moving into a higher price range.

Credit: DepositPhotos

The strategic expansion into new markets, coupled with favorable analyst sentiment and strong institutional support, positions DraftKings favorably for continued success.

Investors might find the current price range an attractive entry point, with the prospect of significant gains as DraftKings capitalizes on its strategic initiatives and the broader trends shaping the online betting industry.


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