Sports activities wagering shares, together with DraftKings (NASDAQ: DKNG), are a comparatively younger asset class, however youth apart, the group is topic to clear seasonal tendencies. These embrace the beginning of soccer season typically appearing as catalyst.
A DraftKings billboard seems at Instances Sq. in New York Metropolis. Analysts stay bullish on the inventory and think about soccer season as a catalyst. (Picture: NASDAQ)
Prosaic as that thesis is and it’s, it’s additionally smart as a result of soccer is essentially the most wagered on sport within the US. The 2024 soccer season will probably be DraftKings’ fifth as a freestanding public firm. Over the prior 4, the inventory’s common acquire was 5% from the beginning of the NFL marketing campaign by way of the Tremendous Bowl, in accordance with Dow Jones Market Information.
DraftKings inventory has been a battleground of late, however the shares could already be pricing in soccer season optimism as highlighted by a ten.69% acquire over the previous week. Some analysts consider the current punishment endured by the gaming inventory might sign a pre-football season shopping for alternative.
With the 2024 NFL season beginning on September fifth and DKNG’s share value down 32% from its $50 excessive in March, this yr’s potential return over this seasonally vital window may very well be significant,” wrote Benchmark analyst Mike Hickey in new report back to shoppers.
He reiterated a “purchase” ranking on DraftKings with a $44 value goal, implying upside of 26.4% from immediately’s closing value. The analyst referred to as the gaming title a “prime concept.”
Soccer, Free Money Circulation May Enhance DraftKings Inventory
Soccer and a strong free money movement path are among the many potential catalysts for DraftKings and there could also be extra to the story.
“DKNGs’ improved outlook, fueled by stronger market win margins in Q3, new person progress, conventional tax mitigation methods, and valuation contraction forward of the NFL season, creates a pretty entry level,” provides Hickey.
Alternatively, the largest impediment to near-term upside for the inventory may very well be the courtroom of public opinion. Latest information movement for DraftKings has been largely detrimental, together with a now scrapped plan to tax successful bets in choose high-tax states. That effort was dropped seemingly solely as a result of rival FanDuel wouldn’t observe alongside.
Then there was information that the gaming agency is shuttering its nonfungible token (NFT) market and halting the Reignmakers fantasy sports activities recreation due to authorized points. Moreover, DraftKings just lately bought Vegas Sports activities Data Community (VSiN) and it’s rumored that the sale value was pennies-on-the-dollar in comparison with the $70 million the gaming firm paid for the radio community in 2021.
“DKNG has become a battleground inventory,” wrote Needham analyst Bernie McTernan in a current report back to shoppers.
Analysts Nonetheless Bullish on DraftKings Inventory
Whereas “battleground” is an correct description of the present state of affairs with DraftKings, Wall Road stays principally constructive on the shares.
“Inside this market, we consider DKNG has a sustainable buyer acquisition technique that ought to proceed to drive its first- or second-place place in all states,” McTernan famous. “We anticipate margins to scale with from tech stack possession, advantages of nationwide vs native advertising and reaching terminal market entry penetration.”
In a report out earlier Tuesday, Oppenheimer positioned DraftKings on its listing of prime fairness concepts for August and September. These 32 shares might outperform over the following yr.
“The corporate [will be] a essential participant in accelerating the shift in U.S. sports activities betting from about $150B wagered illegally/offshore to licensed home operators,” mentioned Oppenheimer of DraftKings.
