DraftKings Could Buy Back $18 Billion of Stock Over 10 Years, Says Analyst

• DraftKings is a product, technology leader in iGaming/sports betting industry
• Company could be a massive buyer of its own shares over the next decade

DraftKings (NASDAQ: DKNG) could be a major buyer of its shares over the next 10 years, potentially retiring as much as $18 billion of its common stock over that period.

That’s the take of Morningstar analyst Dan Wasiolek, who in a new report, highlighted the gaming company’s financial strength, noting the biggest chunk of that buyback activity is likely to occur in the back half of the 10-year forecast. The possibility of DraftKings returning capital to investors at that level is testament to the operator’s sound financial position.

We see DraftKings’ financial health as extremely sound,” observes Wasiolek. “The company remains in a net cash position, ending 2024 with $1.33 billion in cash against $1.26 billion in long-term debt, which is not scheduled to mature until 2028. Further, DraftKings has $500 million available in an untapped revolver.”

Boston-based DraftKings hasn’t said it plans to repurchase $18 billion of its stock over the next 10 years, but the company is in the midst of a $1 billion repurchase plan announced a year ago under which it retired 6.5 million shares in the first half of this year.

Buyback activity of $18 billion, even over a decade, would be massive when considering DraftKings’ current market capitalization is $22.69 billion and, if it materializes, it would go a long way toward eliminating millions of shares brought to market by insider selling.

DraftKings Has Product, Tech Advantages

The US online sports betting industry is ultra-competitive, but DraftKings and FanDuel have formed a seemingly impenetrable duopoly. Investments in product and technology are among the reasons DraftKings is one of the leaders in the space.

The sportsbook giant’s product investment, including a focus on in-game wagering, could be a near-term catalyst with football season nearly here. Its ability to execute acquisitions to expand its product portfolio and tech stack has been lauded by Wall Street.

Despite ongoing competition and the threat of heightened regulation, we think DraftKings’ stout technology and product offering produce a brand advantage, the source of its narrow moat,” adds Wasiolek. “DraftKings’ in-house technology platform (acquired in 2020) allows more control into leveraging customer data and launching new products.”

The Morningstar analyst notes DraftKings has maintained top revenue positioning despite increasing competition in the internet sports wagering realm and that the operator is benefiting from improving in-game and parlay offerings.

DraftKings Has Branding Advantage, Too

Morningstar assigns a narrow moat rating to DraftKings, which is better than no moat, with the research firm highlighting the operator’s enviable brand recognition. While DraftKings isn’t a wide moat name, having some competitive moat could be additive for the shares over the long term.

While the space is rife with competition, we are seeing growing evidence that DraftKings’ critical mass US digital revenue share is proving durable,” said Wasiolek.

He notes DraftKings could post a revenue compound annual growth rate of 21% from this year through 2029.