DraftKings Stock Soars After Inclusion in Biggest ARK Fund, Analysts Cheer Investor Day Comments

Posted on: March 10, 2021, 10:24h. 

Last updated on: July 5, 2021, 01:36h.

DraftKings (NASDAQ:DKNG) is on pace for one of its best days since its debut last April as market participants embrace another round of bullish commentary from sell-side analysts and support for the name from a famed investor.

DraftKings stock
ARK Invest founder Cathie Wood. Her firm continues buying large amounts of DraftKings stock. (Image: Barron’s)

In midday trading, shares of the sportsbook operator are higher by nearly 10 percent — a sign the Boston-based company is earning glowing reviews following its March 9 investor day. Yesterday, the operator told investors the North American iGaming and online sports wagering markets could eventually be worth $67 billion.

DraftKings added that the US sports betting business could be worth $22 billion at maturity and it raised its long-term earnings before interest, taxes, depreciation and amortization (EBITDA) forecast to $1.7 billion.

In our view, DKNG provides one of the better user experiences given product innovation, wide offerings and seamless UI,” said Macquarie analyst Chad Beynon in a note.

“In addition, following the third-quarter SBTech migration, which will bear financial synergies, this could further unlock the ability to properly curate/recommend personalized items as well as create new and innovative content,” Beynon added.

Beynon lifts his price target on the stock to $73 from $71 while reiterating an “outperform” rating. That new forecast implies upside of almost 18 percent from the March 9 close.

More ARK Support for DraftKings Stock

Another catalyst for today’s DraftKings upside is the ongoing support of the name from Cathie Wood’s ARK Investment Management, which has recently been feasting on the shares.

Yesterday, the money manager issuer bought 949,000 shares of DraftKings for the ARK Innovation ETF (NYSEARCA:ARKK) — the firm’s flagship exchange traded fund (ETF). That purchase follows a buy of 748,201 shares allocated to ARKK on Monday and the purchase of 56,900 shares directed to another ARK fund on the same day.

ARK started buying DraftKings stock in February, initially including the name in the ARK Next Generation ETF (NYSEARCA:ARKW) and later the ARK Fintech Innovation ETF (NYSEARCA:ARKF).

The inclusion of DraftKings in the Innovation ETF is a strong endorsement of the stock because that fund has $17.68 billion in assets under management, making it the largest actively managed ETF in the US. The gaming equity accounts for 0.47 percent of that fund’s weight.

Across the three aforementioned ETFs, ARK holds approximately 3.7 million DraftKings shares. On that basis, the fund manager is now the 12th-largest institutional owner of the equity.

More Good Vibes

It wasn’t just Beynon and Wood contributing to today’s surge by DraftKings stock. At least a half dozen other analysts made positive comments on the name following the investor with several joining Beynon in boosting price targets.

Needham analyst Chris Pierce highlighted “1) DKNG bumping up the low end of potential iGaming market share; 2) Further commentary around a potential oligopoly market structure developing, which stands to benefit DKNG as a market leader; 3) A smattering of potentially bullish OSB nuggets: illegal market conversion still in the early innings, DKNG’s customer makeup of casual vs VIP players, & in-game wagering as a potential differentiator as DKNG is able to leverage the SBTech integration.”

He has a “buy” rating and an $80 forecast on the stock.