Analysts Optimistic over DraftKings’ Prospects with the Start of NFL Season

DraftKings stock is down 1.3% in 2024 due to stiff competition, higher taxes on sports betting, and concern over several recent gambling scandals that could damage the company’s public image. Although DraftKings stock underperformed this year, many analysts remain bullish regarding the prospects of the sports-betting company, considering the NFL season is around the corner. 

Positive Factors Bode Well for the Operator
Many analysts see the upcoming football season as a make-or-break moment for the company that could significantly bolster its performance. Benchmark analyst Mike Hickey recently issued a “Buy” rating for DraftKings, placing a price target of $44 for the stock—28% above Monday’s close of $34.41 and noting that it presented a significant opportunity.

Hickey drew attention to the fact that the stock was 32% down from its March high of $50, and the start of the football season on 5 September could result in a significant bounceback. The NFL season traditionally results in Q4 financials significantly surpassing previous quarters as fans log into the platform to support their favorite teams and players.

DKNGs’ improved outlook, fueled by stronger market win margins in Q3, new user growth, traditional tax mitigatstrategies, and valuation contraction ahead of the NFL season, creates an attractive entry point.

Mike Hickey, Benchmark analyst
Dow Jones Market Data revealed that DraftKings has been enjoying a 5% year-over-year gain from the beginning of the NFL regular season to the Super Bowl. Furthermore,  sustainable customer acquisition strategies could bolster the operator’s position across core states, enhancing brand recognition and market penetration.

Short-Term Difficulties Should Not Have a Significant Impact
Analysts at JMP Securities were also optimistic, noting that the company has made substantial market share gains in the US sports betting space. DraftKings held 37.8% of the total US online gaming market in reported states in July 2024, up from 35.5% in the second quarter. The gains came in a typically slow month and were attributed to a rebound in gaming margins to over 10%.

Despite these positive developments, DraftKings also faces several immediate obstacles. The operator is currently embroiled in a legal dispute over a non-compete agreement with its former head of VIP, Michael Hermalyn. Furthermore, the company recently found itself in hot water with the New Jersey regulator due to revenue reporting violations, causing significant issues.

These setbacks did not dampen analyst confidence as most maintain a “Buy” rating. The broad consensus is that DraftKings is well-positioned to capitalize on the surge in sports betting activity, translating it into significant gains for the company and its investors. The operator should be able to overcome short-term challenges and capitalize on emerging opportunities.