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Patience Required as DraftKings Plans Its British Invasion
Stock Analysis & Ideas

Patience Required as DraftKings Plans Its British Invasion

DraftKings (DKNG) is a digital sports, gaming, and entertainment company, with a fast-growing suite of retail sportsbook and casino gaming products.

I am bullish on DKNG stock. (See Analysts’ Top Stocks on TipRanks)

The onset of the COVID-19 pandemic created challenges for many industries, but DraftKings has prospered due to increasing interest in iGaming and sports betting.

On the other hand, DKNG stock doesn’t seem like the horse to bet on as of late. It has gone nowhere for the past six months, and investors are undoubtedly thinking about placing their bets elsewhere.

Perhaps the traders are concerned about DraftKing’s recent challenges, as the company strives to expand internationally, particularly into the United Kingdom. Yet, patience and faith in DraftKings may be rewarded in the near future.

A Quick Look at DKNG Stock

Optimism was the prevailing sentiment during the first quarter of 2021 as DKNG stock shot up from $45 to a 52-week high of $74.38.

That rally wasn’t meant to last, though, as the sellers brought DKNG stock right back into the $40s in May. Fast-forward to mid-October, and the share price was still between $40 and $50.

If DKNG stock gets anywhere near $41, that’s a potential action signal as the stock bounced off of $41 in May.

Gaming Without Borders

DraftKings’ stakeholders might have felt a sense of excitement last month because the company offered to take over U.K.-based gaming company Entain.

The takeover proposal was for roughly $22.6 billion. Sure, that’s pricey, but owning Entain could clear the runway for a major foray into the lucrative British gaming market.

Just as importantly, it would be a sign that DraftKings’ ambitions aren’t restricted to any particular country or continent.

Depending on your location and interests, you might never have heard of Entain.

However, Entain has a strong presence in European sports betting and iGaming through its suite of brands. These brands include Party Poker, Coral, and Ladbrokes.

Also, Entain owns its own technology. The hefty price tag of a potential takeover could be justified if DraftKings were to incorporate Entain’s gaming tech.

Deal Deferred, but Not Scrapped

Buying out Entain isn’t a simple process, however. It would have to be done within the U.K.’s takeover rules.

DraftKings had until October 19 to formalize its $22.4-billion buyout bid for Entain. As that date arrived without a final resolution, some DKNG stockholders may have felt a sense of frustration.

However, there’s no need to fret. DraftKings just announced that, under Rule 2.6 of the City Code on Takeovers and Mergers, the company has been given an extension to November 16.

DraftKings has until that date to either “announce a firm intention to make an offer for Entain,” or not.

In other words, the deal is only delayed, not abandoned altogether.

If anything, the stakeholders should be hopeful. DraftKings assured that it will “continue to engage in discussions between both companies,” as well as to conduct further “substantive due diligence and analysis” in regard to the potential Entain buyout.

In the coming weeks, therefore, investors should expect DraftKings to “put up or shut up,” so to speak. Hopefully, a deal will be finalized soon.

Wall Street’s Take

According to TipRanks’ consensus rating, DKNG is a Moderate Buy, based on 12 Buy ratings, four Hold ratings, and one Sell rating. The average DraftKings price target is $69.73, implying 42.1% upside potential.

The Takeaway

Don’t get the wrong impression. The possible Entain takeover isn’t a make-or-break event for DraftKings.

Nonetheless, it would signify a major entry into the European gaming market. It could also bring more investors into the fold, as DraftKings demonstrates its international ambitions.

Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.

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