DraftKings is a gaming and digital sports entertainment company. It provides online daily fantasy sports (DFS), iGaming, and online sports betting (OSB). This stock has great potential. It has already reported a 219% year-to-date gain. Experts think that, with the return of major league sports, additional growth is in store for the company.
Benchmark’s Analyst Mike Hickey listed several key components strengthening his bullish thesis about this stock. Among them are DraftKings’ leading brand and market share in DFS, a potentially massive market from OSB, and iGaming state legalization initiatives, along with a solid financial position.
DraftKings was one of the early leaders to emerge in OSB and iGaming. Now, it is the dominant player in the DFS space. Hickey thinks that both iGaming and OSB are nascent markets that have the potential to be multi-billion-dollar domestic opportunities.
Sports betting is currently legal in 23 states, and the market is expanding at a rapid pace. OSB is already legal in 14 states (24% of the population), while OSB is live or operational in 10 states (15% of the population).
Hickey estimated that the online sports betting market could amass an $18.6 billion-plus TAM, given the legalization efforts in several parts of the U.S.
While the iGaming market’s legalization has been slower, it could still achieve a $17.7 billion-plus TAM in the U.S. Thus far, four states have legalized iGaming, so DraftKings is operational in N.J., PA, and W.V.
The company’s balance sheet is solid, and its adjusted cash balance consists of roughly $1.3-$1.4 billion. Its estimated monthly cash burn would be approximately $15-$20 million if professional sports were hindered. On the other hand, in case of success, DraftKings could generate $3.7 billion in sales and $1.1 billion in adjusted EBITDA by FY30.
Hickey rated the stock as a Buy with a $47 price target. It has a 38% upside potential. So far, the stock has got 11 Buys and lone Hold ratings, with a consensus of it being a Strong Buy. At $47, the average price target is identical to Hickey’s.
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