Online gambling company DraftKings Inc (NASDAQ: DKNG) is the first pure-play online gambling company in the U.S. with the scale necessary to conquer the growing market, according to Susquehanna Financial Group.
The DraftKings Analyst
Joseph Stauff initiated coverage of DraftKings with a Positive rating and $33 price target.
The DraftKings Thesis
DraftKings is already a market leader in the U.S. sports betting market after seven years of operations, with 12 million registered users, of which 8% are active monthly and 36% are active during the year, Stauff said in a Thursday initiation note. (See his track record here.)
The company has a head start against new potential rivals, including regulatory familiarity in 43 states and expertise with a customer acquisition retention "engine," the analyst said.
The long-term case for DraftKings is based on expectations for the U.S. online gambling market to grow from $2 billion today to a range of $20 billion to $40 billion in 10 years, he said.
This figure doesn't include the estimated illegal sports betting market of $13 billion, Stauff said.
Over the near-term, the COVID-19 pandemic merely "temporarily deferred" demand for sports betting, and there should be a "snap back" ahead of a potential return of the MLB and Premier League seasons in June, the analyst said.
The NFL Draft in late April prompted five times more wagers placed on a year-over-year basis, while a May 9 UFC fight was the most-bet MMA event even before the main card started, he said.
DraftKings is modeled to report a net gaming revenue compounded annual growth rate of at least 80% from $110 million in 2019 to $676 million in 2022, according to Susquehanna.
DKNG Price Action
Shares of DraftKings were trading 3.85% higher at $26.85 at the time of publication.