DraftKings: Analysts Optimistic Ahead of NFL Season

Date: 2024-08-21 Author: Kirill Zagoruyko Categories: SPORTS BETTING
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DraftKings shares are down 1.3% in 2024 due to stiff competition, increased betting taxes, and concerns about a number of recent scandals that could negatively impact the company's reputation. Although DraftKings shares have underperformed this year, many analysts remain optimistic about the company's prospects, especially ahead of the NFL season.

Favorable Factors for the Operator

Many experts believe the upcoming football season could be a key moment for the company, with the potential to significantly improve its performance. Benchmark analyst Mike Hickey recently issued a Buy rating on DraftKings shares, setting a price target of $44 per share, which is 28% higher than the current price of $34.41. Hickey noted that the company’s stock has fallen 32% from its March peak of $50, and the start of the NFL season on September 5 could lead to significant gains.

The NFL season traditionally drives fourth-quarter earnings that significantly outperform previous quarters, as fans actively use the platform to support their favorite teams and players. DraftKings’ improved outlook, supported by third-quarter market margin growth, increased user numbers, and traditional tax-minimizing strategies and a lower valuation ahead of the NFL season, makes this an attractive opportunity for investors.

Mike Hickey, Benchmark Analyst DraftKings posted 5% year-over-year growth from the start of the NFL regular season through the Super Bowl, according to Dow Jones Market Data. Moreover, robust customer acquisition strategies could strengthen the operator’s position in key states, increasing brand awareness and market penetration.

Short-term headwinds shouldn’t seriously affect the company

JMP Securities analysts are also optimistic, noting that the company has significantly increased its share of the U.S. sports betting market. In July 2024, DraftKings’ share of the U.S. online gaming market was 37.8%, up from 35.5% in the second quarter. This growth came in a typically quiet month and is due to the recovery of margins in the gaming sector to more than 10%.

Despite these positive trends, DraftKings faces some immediate challenges. The operator is currently involved in a lawsuit over a non-compete agreement with former head of VIP customer service Michael Hermalin. In addition, the company recently found itself at the center of a scandal with the New Jersey regulator due to irregularities in revenue reporting, which led to serious problems.

However, most analysts maintain their Buy recommendations. The general consensus is that DraftKings is well-positioned to take advantage of the growth in sports betting activity, which will provide significant benefits to the company and its investors. The operator is expected to be able to overcome short-term challenges and seize new opportunities for further growth.
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