DraftKings Best Play on US Online Gaming Market Says Chad Beynon

Posted on: February 18, 2025, 03:45h. 

Last updated on: February 19, 2025, 05:29h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.
  • DraftKings top domestic large-cap internet gaming stock, says Macquarie
  • Favorable demographics, cash flow support bull case

Even with Tuesday’s pullback, DraftKings (NASDAQ: DKNG) stock is on a scintillating run, having surged 29.41% over the past month. At least one analyst believes the name is the best way to tap into the US internet betting space.

DraftKings stock
DraftKings highlighted at the Nasdaq market site. An analyst said it’s the best way to play the US internet gaming market. (Image: NASDAQ)

In a new report to clients, Macquarie analyst Chad Beynon said DraftKings is the best large-cap option for investors looking to access the domestic online gaming market. He reiterated an “outperform” rating on the high-flying stock while boosting his price target to $60 from $54. That implies upside of 16.7% from where the shares trade at this writing.

We view DKNG as the best large-cap way to play the US online market given its first-mover advantage, strong brand recognition with younger demographics, and superior tech,” observes Beynon.

The analyst’s bullish call on the gaming stock arrived five days after the operator raised its 2025 revenue guidance – a forecast that does not include the addition of Missouri or any other new jurisdictions.

DraftKings Profitability Accelerating

Last year was the first in which DraftKings notched positive free cash flow and earnings before interest, taxes, depreciation, and amortization (EBITDA) on an annual basis. Beynon expects more of the same this year with the operator poised to boost both metrics.

He believes the operator can deliver those increases with the helped of reduced promotional intensity, increased hold and superior operating leverage. DraftKings management forecast 2025 free cash flow of $850 million.

“Management expects all four quarters to be EBITDA positive, with 80% of EBITDA coming in 2Q and 4Q,” adds Beynon. “In terms of 1Q, the year is off to a strong start, with Jan rev/EBITDA exceeding company expectations on actual sportsbook hold of 11%. Month-to-date through Feb 11, metrics continue to be strong with an actual sportsbook hold percentage of 13%.”

The prevailing wisdom among analysts is that while the Super Bowl result was unkind to sportsbooks, the event was profitable in terms of new customer acquisition and that could pay dividends for operators such as DraftKings as 2025 moves along.

DraftKings Announces $500 Million Term Loan

Separately, DraftKings announced today the formation of a syndicate for a proposed senior secured term loan B credit facility in the amount of $500 million.

“DraftKings intends to utilize the net proceeds of the Term Loan B for general corporate purposes,” according to a press release from the gaming company.

That’s unlikely to be a strain on DraftKings’ balance sheet, which featured cash and cash equivalents of $788.28 million at the end of last year and low debt.