Posted on: July 6, 2023, 06:07h.
Final up to date on: July 7, 2023, 10:25h.
On the again of bettering price administration and above-average maintain in some markets, DraftKings (NASDAQ: DKNG) drew kudos from a pair of sell-side analysts on Thursday.
In studies to shoppers on Thursday, Deutsche Financial institution analyst Carlo Santarelli and JPMorgan’s Joseph Greff waxed modestly bullish on DraftKings, with Santarelli lifting his worth goal on the inventory to $24 from $22. Greff upped his worth goal on the identify to $20. Each are under Thursday’s closing worth of $25.23. Citing better-than-expected iGaming metrics, Santarelli lifted his 2023 and 2024 income projections on DraftKings.
Whereas the gaming firm has made decreasing prices a core focus this 12 months, the Deutsche Financial institution analyst sees the operator benefiting from elevated maintain.
Whereas DKNG’s maintain enchancment, the first driver of its [year-over-year] market-share development, has been robust, it’s largely a results of the gross maintain power, moderately than the relative promotional disciplines,” wrote Santarelli.
He added that wider spreads, same-game parlays, and operators’ rising capacity to determine and restrict sharp bettors are among the many elements boding properly for the trade, together with DraftKings.
Golden Nugget On-line Deal Paying Off for DraftKings
It’s been 14 months since DraftKings accomplished its $1.56 billion all-stock acquisition of Tilman Fertitta’s Golden Nugget On-line Gaming (GNOG). That deal is now paying dividends for the customer.
The GNOG purchase helped set up DraftKings as a frontrunner within the web on line casino area, whereas serving to it add market share within the states during which GNOG was operational. Talking of market share, Santarelli estimates DraftKings’ share is as much as 31%, because of robust begins in states that not too long ago added on-line sports activities betting, together with Kansas, Maryland, Massachusetts, and Ohio.
“We view the consistency of DKNG’s OSB share favorably, and consider, within the absence of a radical change inside the trade from new competitors, one thing we view as unlikely, DKNG is more likely to keep, and even probably develop, share from present ranges,” noticed the analyst.
As for brand spanking new states contributing to the DraftKings thesis, Florida isn’t more likely to be one due to the Seminole Tribe’s stranglehold on gaming in that state, in keeping with Santarelli.
Parlay Holds Rising, however Beware Tipping Level
Similar-game parlays are proving extremely profitable for operators comparable to DraftKings and FanDuel, and people bets serve the goals of luring clients and boosting maintain.
Nevertheless, there’s one other facet to the story. As Santarelli notes, rising maintain for operators implies an rising price of leisure for bettors, implying that there’s a restrict to how lengthy clients will endure bets with elevated benefits for the operator. He cites the arrival of 6-5 blackjack and triple-zero roulette on the Las Vegas Strip, which led to greater income for on line casino operators, however a dwindling share of desk video games play.
“Whereas we don’t consider that threshold has been reached, and we don’t anticipate it is going to be reached anytime quickly, given the expertise of FanDuel relative to the broader market. There are historic anecdotes that talk to conditions that seemingly suggest, it does occur,” concluded the analyst.