DraftKings deserves caution, research firm says
After another impressive run this week, shares of DraftKings (NASDAQ: DKNG) are up 38.31% over the past month and up 236.60% year to date, but some analysts believe the There are problems with high-profile gambling games, and companies should be careful.
The online sportsbook delighted the investor community this month by raising its earnings before interest, taxes, depreciation, and amortization (EBITDA) and revenue forecasts for 2023 and 2024, along with a similar announcement at its investor day Results for 2025 and beyond start this week. Some market observers believe DraftKings' strong third-quarter results are a byproduct of an unusually weak competitive landscape.
Most notable was the unusually weak competitive landscape between July and September, during which DKNG's market share surged. ” observes Eilers & Krejeck Gaming (EKG). “Barstool is in trouble, BetMGM has spent very little money and, by its own admission, launched a sub-par sports betting product. Caesars also cut back, while Fanatics is just getting back on its feet. "
New competitive threats to established online sports betting (OSB) operators like DraftKings include Bet365, Penn Entertainment's (NASDAQ: PENN ) newly launched ESPN Bet and Fanatics.
DraftKings is ready for tougher competition
DraftKings welcomes new entrants to the sports betting space and says it's ready for the game.
The operator and FanDuel form a duopoly in the U.S. sports betting industry, with a combined market share of over 70%. Data shows DraftKings is also taking a stake. Instead, the industry suffered some smaller losses, with some operators going bankrupt or choosing to sell to larger competitors.
Another point is that competition in the domestic sports betting industry is evolving and could be more credible for DraftKings and FanDuel wrestling stocks. Incumbents have learned their lesson on spending, while new entrants have the capital to compete immediately.
"Caesars invested significant capital into OSB in Q3 '21 and Q2 '22, during which product and operational execution were far from market-leading). In fact, several brands will be included in this round (ESPN Bet, Fanatics, bet365), these brands all have scale ambitions, huge funding, competitive products and increasingly complex operational games,” EKG added.
DraftKings has a strong foundation
While DraftKings stock has performed well this year, new competitors shouldn't be ignored, nor should the operator's strong fundamental prospects. That includes expectations that the company's cash balance will exceed $1.2 billion by the end of the year. Additionally, it shortens the time it takes for DraftKings customers to become profitable for the company.
DraftKings said its 2023 customer base will recoup the cost of purchase in 2.3 years, compared with nearly three years for 2021 customers. This trend is driven by betting mix improvements (more combinations!) and marketing efficiency. "ECG summary.
These factors and others may be why at least five sell-side analysts raised their DraftKings price targets this week.
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Source: www.casino.org
