DraftKings Makes Wall Street Gains
Daily fantasy sports and sports betting platform DraftKings continues to earn investor attention on Wall Street, months after beginning trading in April. Analysts are predicting that the company could grow to become a global powerhouse in online gambling, citing its presence in multiple states as being key to its future success.
DraftKings stock has nearly doubled since it first debuted on Wall Street despite the coronavirus-caused closures of major American sports leagues. Now, with major sports set to return in the next month, DraftKings stock has attracted bull ratings due to its perception as penetrating the large online sports betting market.
According to analyst Jeff Cohen, DraftKings is favored by investors due to its brand recognition amongst bettors, the capabilities of its product, and the scale of its offerings. DraftKings also holds 60 percent of the market share in daily fantasy sports against other competitors including Flutter Entertainment-owned FanDuel.
Cohen, who works as a financial analyst for research firm Stephens, Inc, assigned DraftKings, which trades on the NASDAQ as DKNG, with an “overweight” rating. He also added a price target of the stock to $52. The average sale price of DKNG stock is $46.80, up from its premarket price of $33.50.
DraftKings has made a name for itself due to its focus on product and technology, and its online base has given them a holistic overview of valuable data. Like online streaming giant Netflix, this has given DraftKings a competitive advantage that informs how it spends its marketing budget and further product investment.
DraftKings also offers streaming of live sports games and other related content that has further fuelled consumer engagement. In turn, this has helped to boost in-game bets. DraftKing is also collaborating with Sportradar, a sports data analyzation company, to create a more refined and attractive product.
While many are looking to DraftKings to reign supreme in the battle for the online sports betting market, others have pointed out that the platform still faces stiff competition. These include Penn National Gaming-backed Barstool Sports, and casino giants Caesars Entertainment and MGM Resorts.
Both Caesars and MGM have online gambling offerings and are available in a number of states, though they are only represented in jurisdictions that their casinos are located. Additionally, the companies have seen their stocks plunge in recent months, with MGM Resorts stocks down more than 30 percent this year.
A noticeable element to both Caesars and MGMs sports betting capabilities are their rewards programs, which see members earn points on a tier-based system. Each tier earns different rewards, including rewarding free parking at casinos or waiving resorts fees at casinos. For the time being, DraftKings cannot compete in the rewards department.
Another unexpected competitor could be Disney, the owner of ESPN. ESPN has recently launched programs that are dedicated to sports betting which has already accumulated a trusted following amongst sports fans. It’s likely that Disney executives see the potential of the market and may consider launching an ESPN-branded sports betting product.
The largest competitor appears to be Penn National Gaming. Penn stocks have more than doubled in the past three months despite the coronavirus closures. Its performance is linked to its acquisition of 36 percent of Barstool Sports, a sports-focused website planning to launch a sports betting app of its own this year.
Barstools founder David Portnoy, a former-Wall Street day trader, has been vocal about the company’s ambitions to shape the sports betting industry. Portnoy has also shared his belief that Barstools is largely responsible for the success of DraftKings and could use its might to replicate its competitor’s success.
According to Penn CEO Jay Snowden, the development of the Barstools sportsbook app was able to continue despite the closures of live sports. He added that the Barstools app is on schedule to launch in the third quarter of 2020, noting the convenient timing as aligning with the recommencement of major sports.
Despite the growing competition, DraftKings CEO Jason Robins has shared his belief that DraftKings will be able to compete with other sportsbooks, and believes the company will still dominate the market.
“There are real benefits to being first to market online. If we can get a strong lead out of the gate, it will be clear we have the best product.”– Jason Robbins, CEO, DraftKings speaking to CNN Business
DraftKings has recently announced another exciting partnership which will allow it to debut in Illinois’ sports betting market earlier than expected. Although current laws prevent DraftKings from offering its online-only platform to Illinoisans for another 18-months, the company has partnered with Casino Queen in East St. Louis to offer its platform to bettors.