DraftKings feels no pressure from new rivals
The U.S. sports betting landscape is filled with wealthy new competitors, but DraftKings (NASDAQ: DKNG ) isn't feeling any negative effects from these new entrants.
Flutter Entertainment's DraftKings and FanDuel represent a duopoly in U.S. online sports betting, controlling more than 70% of the market. Competitors believe they can steal some share, and there's evidence Fanatics and Penn Entertainment's (NASDAQ: PENN ) ESPN Bet are off to a strong start, but that's not quite there yet for DraftKings A headwind.
DraftKings said there will be no immediate impact from the launch of ESPN Bet and believes the product has the potential to grow the market," Stifel analyst Jeffrey Stantial wrote in a note to clients.
The analyst recently met with executives from the gaming company. He rates the stock a "hold" with a $40 price target, representing 13.1% upside potential from today's closing price of $35.35.
DraftKings proves resistant to ESPN Bet
Fanatics and ESPN Bet are two of the most highly rated newcomers to sports betting, with the latter debuting last month. The reason is simple: carriers have the resources to compete with giants DraftKings and FanDuel.
As more states introduce regulated mobile sports betting, some operators are choosing not to waste money solely on customer acquisition. As a result, some bookmakers have scaled back their U.S. sports betting ambitions or exited the market because it was difficult to turn a profit after investing money simply to gain market share.
Fanataics and ESPN Bet may produce different results in the long run, and while the latter appears to be getting off to a faster start, it hasn't yet been a drag on DraftKings in states where operators compete with each other.
Stantial added: "It's encouraging that DraftKings has had little impact on its customer base and in November and early December in states where it competes with ESPN Bet, its subscriber churn and Consumption patterns are similar.”
This could be a sign that ESPN Bet is acquiring stakes in other companies, or that the overall sports betting market is growing.
iGaming and product development likely to drive DraftKings growth in 2024
Despite this week's decline, DraftKings shares have more than tripled since the beginning of the year. Savvy investors ask, "What happens next?" That means the onus is on the operators to provide catalysts to keep market participants interested in the stock into 2024.
This includes new products such as Fantasy Pick6 and progressive jackpots, as well as access to additional iGaming stakes, which may be supported by positive legislative outcomes next year.
"We remain confident in DraftKings' fundamental outlook as state-by-state online sports betting and iCasino growth remains healthy, the product mix drives higher net gaming revenue and margins, the outlook for new state legislation in 2024 is bright, and "DraftKings continues to grow in the face of New competition," Stantil concluded. "However, valuations are challenging and we remain cautious about possible consolidation of iCasino market share. Therefore, we reiterate "Hold" but remain opportunistic in the face of setbacks. "
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Source: www.casino.org
