Market Overview

Morgan Stanley Wants To Bet On DraftKing's Stock

Share:
Morgan Stanley Wants To Bet On DraftKing's Stock

Online sports gaming company DraftKings is almost a pure-play investment on U.S. legal sports betting and iGaming growth, according to Morgan Stanley.

Note: DraftKings merged with special purpose acquisition company Diamond Eagle (NASDAQ: DKNG) and the stock started to trade last Friday.

The Diamond Eagle Analyst

Thomas Allen initiated coverage of Diamond Eagle (NASDAQ: DKNG) with an Overweight rating and $23 price target.

The Diamond Eagle Thesis

The legal online sports and gambling market in the U.S. remains in the very early stages but as new states legalize the market, total revenue should rise eight-fold from less than $1.5 billion in 2019 to $12 billion in 2025.

Allen said the assumption is based on an average spend per adult of $40, which is a discount to more developed markets like the United Kingdom and Australia. DraftKings is likely to command a 20% market share of the sports betting category and 15% of online gambling.

DraftKings is backed by more than $500 million of net cash, which is further strengthened by national advertising. By comparison, many of DraftKings' competitors are facing difficulties with their liquidity positions. As such, the company should become profitable in 2023, achieve EBITDA of $640 million in 2025, and $1 billion in 2028.

Unlike some of DraftKings' peers, the company has no brick-and-mortar presence or international regulatory risks, the analyst wrote in the note. This warrants a premium valuation given its direct exposure to the legal U.S. sports and gambling market.

DKNG Price Action

Shares of Diamond Eagle trade around $19.41.

Related Links:

DraftKings, NFL Execs Talk Sports Betting, Increased Engagement At Forbes Summit

'The NFL Is More Popular Than Ever': DraftKings CEO Talks Explosive Sports Betting Growth

Photo credit: Baishampayan Ghose, Flickr

Latest Ratings for DKNG

DateFirmActionFromTo
May 2020Goldman SachsInitiates Coverage OnNeutral
May 2020Craig-HallumReiteratesBuy
May 2020Morgan StanleyMaintainsOverweight

View More Analyst Ratings for DKNG
View the Latest Analyst Ratings

 

Related Articles (DKNG)

View Comments and Join the Discussion!

Posted-In: DraftKings gaming sports betting Sports GamingAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
SONNChardan CapitalInitiates Coverage On7.0
AEEUBSMaintains83.0
WYNNUBSMaintains85.0
WTRGUBSMaintains45.0
DOMOCowen & Co.Maintains36.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com