Macquarie: DraftKings One of the Most Compelling Growth Stories in Gaming

• After months of stagnation, DraftKings (DKNG) is finally flashing “buy” signals as the stock regains its upward momentum
• The company is reporting a massive breakthrough in its prediction market tech—a move that could revolutionize how we bet on non-sports events
• Macquarie analysts are officially sounding the alarm on a major “undervalue” play, forecasting double-digit upside for the betting giant

From unrivaled sports betting dominance to a burgeoning prediction market, DraftKings (DKNG) is flashing major growth signals that have analysts calling it one of the most attractive plays in the sector today.

In a new report to clients, Macquarie analyst Chad Beynon said DraftKings “remains one of the most compelling structural growth [stories],” citing the aforementioned factors. The stock jumped 8.64% this week, helped in part by first-quarter earnings that included encouraging details on DraftKings Predictions.

The predictions product is fast evolving, with market making already launched and the proprietary exchange to follow in the coming weeks,” observes Beynon. “DKNG is now positioned to ramp up predictions customer acquisition spend, which it expects to drive a significant increase in monthly unique players (MUPs) in the back half of the year.”

He reiterated an “outperform” rating on the stock with a 12-month price target of $38, implying upside of 59.1% from Friday’s closing price.

DraftKings Predictions Could Be Long-Term Growth Driver

DraftKings rolled out DraftKings Predictions last December and there are already signs that the gaming company’s event contracts offering could be a catalyst for long-term growth.

So, while DraftKings has a long way to be competitive with the likes of Kalshi from a market share standpoint, it has the ability to be a viable contender in the prediction market arena.

Additionally, DraftKings can leverage its sports betting expertise for prediction market success – something it did with its daily fantasy sports (DFS) prowess following 2018 ruling on the Professional and Amateur Sports Protection Act (PASPA).

“We have seen this playbook before, when upfront investment secures the long-term growth runway,” adds Beynon.

Market Making Could Be DraftKings Catalyst, Too

DraftKings recently launched an all-encompassing mobile application, also known as a super app, that is already paying dividends in terms of driving prediction market customer acquisition costs lower by 80% last month. Alone, that’s impressive, but the operator has other prediction market levers to pull, including market making.

That’s a seamless transition for a company well-versed in sports trading and one that could be a driver of share price appreciation.

“We have also launched market making, which unlocks access to an additional layer of the value chain,” wrote Robins. “Market making is already generating a positive return for us. In the coming weeks, we expect to launch our proprietary exchange and to begin offering combos. Together, these moves will accelerate innovation, improve the customer experience, and strengthen our economics.”