DraftKings Jumps as Loop Capital Reveals $100 Target, Highest on Wall Street
Posted on: November 17, 2020, 08:08h.
Last updated on: November 17, 2020, 09:38h.
DraftKings (NASDAQ:DKNG) is off to a strong start Tuesday. Loop Capital initiated coverage of the daily fantasy sports (DFS) and sportsbook operator with a “buy” rating and $100 price forecast.
Since going public in late April, DraftKings frequently garners praise from the sell-side community, but Loop Capital’s $100 projection is far and away the highest on the name. Putting that call into context, the previous high in terms of DraftKings price targets was $76. The consensus estimate is around $59 and the stock currently resides just under $45, meaning it would need to more than double to reach $100.
Not surprisingly, Loop analyst Daniel Adam cites online casinos and expanded sports wagering as catalysts that can carry the stock to the triple-digit promised land.
The most significant drivers are online sports betting and iGaming. We estimate the true total addressable market for these markets is over $30 billion in the U.S. at maturity, significantly greater than the ~$20 billion total addressable market that other analysts are modeling,” said Adam in a note to clients.
For now, the $100 call seems ambitious. In its time as a public company, DraftKings only briefly traded above $64 — the all-time high is $64.19 — and is off 31.41 percent from that high.
A long-held thesis among analysts covering DraftKings is that the company is positioned as a primary winner. That’s as more states turn to internet casinos and sports wagering as avenues for generating revenue.
There’s something to that thesis, because results from Election Day earlier this month confirm attitudes toward gaming expansion are increasingly hospitable. Voters in six states considered various gaming-related initiatives, including three sports betting proposals, and all resoundingly passed with Louisiana, Maryland, and South Dakota joining the ranks of legal sports wagering states.
Loop Capital’s Adam views DraftKings as the biggest winner of this trend.
“We expect DKNG to emerge the undisputed share leader and biggest beneficiary of the rapidly growing domestic online gaming industry,” said the analyst.
DraftKings is the second-largest online sportsbook operator behind rival FanDuel in terms of market share, with the former currently offering internet and mobile betting in nine states, a number that’s likely to increase in the near future.
In many of the states in which it’s operational, DraftKings enjoys dominant market positioning, ranking at or near the top, and is often able to rapidly ascend to those heights. For example, Illinois is already one of the company’s most prominent markets, although the state is one of the newest entrants to the live and legal group.
The online casino opportunity is currently confined to a smaller number of states. But DraftKings is reaping rewards from that business in New Jersey, Pennsylvania, and West Virginia.
“The company continues to work with state officials on regulations and licensing in Michigan for sports betting and iGaming, and in Virginia for sports betting, and expects to launch in these states at the earliest practicable opportunity,” it said last week.
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