What Did Analysts Think of DraftKings' Investor Day Presentation?
Draftkings Inc (NASDAQ:DKNG) held an investor day on March 9 to discuss the company’s total addressable market and a look into the future. Analysts shared their reactions to the presentation.
The DraftKings Analysts: Bank of America analyst Shaun C. Kelley reiterates a Neutral rating with a $70 price target.
Morgan Stanley analyst Thomas Allen reiterates an Overweight rating with a price target of $66.
Rosenblatt Securities analyst Bernie McTernan reiterates a Buy rating and raises the price target from $72 to $81.
Needham analyst Chris Pierce reiterates a Buy rating with a price target of $80.
Total Addressable Market: The big takeaway from the investor day was DraftKings' new comments on its total addressable market for online sports betting and iGaming.
DraftKings is raising its total addressable market size from $39 billion to $62 billion. The new figure breaks down as $22 billion U.S. online sports betting, $40 billion U.S. iGaming and $5 billion Canada.
“DraftKings increased their North American TAM forecast by nearly 60% primarily driven by iGaming and secondarily U.S. OSB and adding Canada,” McTernan said.
The addition of Canada was not factored into many of the analysts’ revenue projections.
McTernan estimates DraftKings could launch in Ontario 2022 and Alberta in 2023. The addition of Canada could add $100 million in revenue in fiscal 2023 projections.
Market Share: DraftKings is tightening its iGaming market share range from a prior 10% to 20% to a new range of 15% to 20%, Kelley noted.
“DraftKings investor day commentary furthers our belief that scale will differentiate the winners in U.S. sports betting/iGaming,” Allen said.
Allen highlights that the comments from DraftKings show that the battle for online sports betting is becoming a five- to seven-player race with a dominant two to three players.
DraftKings is live in 12 states, which is more than any other competitor. Six operators offer online sports betting in five or more states and 13 operators offer online sports betting in two to four states.
Allen notes that DraftKings has around a 30% market share for online sports betting and around 19% for iGaming, including 15% or more share for iGaming in every state it operates in.
An oligopoly is forming with the current market structure for online sports betting, Pierce noted. The top four online sports betting operators had 96% of the market share in Michigan for January.
What’s Next: DraftKings should reach EBITDA positive by 2024 or 2025, Kelley noted in his update.
“Our confidence is growing that revenue will convert to profits over time as DKNG is demonstrating attractive customer lifetime values,” McTernan said. "We continue to expect DKNG to benefit from the convergence of sports betting and media, most recently highlighted by their agreement with DISH."
“The event increases our confidence in DKNG’s ability to reach established goals,” Kelley said.
DKNG Price Action: DraftKings shares are up 12% to $69.48 on Wednesday.
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