With a year-to-date share gain of 245%, online sports betting player DraftKings (DKNG) has been a 2020 success story. However, the gambling specialist has had plenty of headwinds to contend with. COVID-19’s disruption of live sports schedules, and the risk of further cancelations due to social unrest have come in tandem with legislative uncertainty and stiff competition.
Yet following a series of investor meetings with CFO Jason Park, Canaccord Genuity analyst Michael Graham remains confident in DraftKings’ ability to execute its game plan.
“While DKNG stock still carries a premium valuation,” Graham said, “We see several areas for possible upside to our forecast for next year and continue to like the stock as a pure-play digital disruptor in a rapidly growing market.”
The online gambling space is shaping up to be a competitive zone, with MGM, Penn/Barstool, and a “well-capitalized” Flutter/FanDuel all vying for a piece of the lucrative cake. So, how does DraftKings stand out from the crowd? The 5-star analyst points to three areas which could offer a “competitive advantage over time.”
Graham explained, “1) technology-first agility to iterate on product and features quickly (DraftKings opened for registration in IL less than 2 hours after the rule change); 2) LTV (lifetime value) / CAC (customer acquisition cost) mentality with digital marketing expertise to guide the company to smart, aggressive marketing decisions; 3) national footprint leading to national scale for brand advertising and therefore lower CAC.”
Despite the current volatile state of the sports calendar, Graham notes DKNG’s “business and engagement are progressing nicely.” The analyst also believes the company’s full-year guidance of $500-$540 million in revenue “still feels very achievable.” Graham’s 2020 revenue estimate for DraftKings comes in at $530 million, close to the high end of DKNG’s forecast.
All in all, Graham maintains his Buy rating and $50 price target for the stock. Investors could be pocketing a 25% gain, should Graham’s thesis play out in the year ahead. (To watch Graham’s track record, click here)
The rest of the Street is banking on a successful year for DraftKings, too. A Strong Buy consensus rating is based on 10 Buys and 3 Holds. At $47.73, the average price target suggests upside of ~20% could be in the cards over the next 12 months. (See DraftKings price targets and analyst ratings on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
