Online sports betting and gambling is taking off in the U.S., and DraftKings (DKNG) is poised to be a leader in that market, an analyst said. DraftKings stock hit a fresh record high.
Needham launched coverage of DraftKings stock with a Buy rating and a price target of 70 vs. an analyst average of around 50.
“We view DKNG as one of the leading beneficiaries as online sports betting and gambling take off in the U.S.,” wrote analyst Brad Erickson in a note late Wednesday.
Erickson says the online gambling market will reach between $42 billion and $58 billion.
Meanwhile, DraftKings has a database of 4 million paid daily fantasy sports users and another 8 million unpaid users, he added. It currently operates in 11 states.
“We believe the company has a leading brand with a target-rich Rolodex related to its market-leading fantasy sports business.” Erickson said. “Also, the company actively uses a data-centric approach to customer acquisition with both operational and capital advantages versus competitors.”
Another upside for DraftKings stock is that state budget deficits are pressuring legislatures to open new sources of tax revenue through both sports betting and online casino games, Erickson said.
Circumstances are driving a significant move toward online sports betting, and boosting the gaming stocks behind the trend.
DraftKings went public on April 24. Diamond Eagle Acquisition Corp., a publicly traded special purpose acquisition company merged with DraftKings. The two companies also teamed up with SBTech, a provider of interactive sports betting solutions and services.
DraftKings recently teamed up with the NFL’s New York Giants. The multiyear agreement lets DraftKings operate a sportsbook, online betting and a virtual sports lounge for the New York Giants.
Earlier, it inked an exclusive deal with Disney (DIS)-owned ESPN to integrate content. DraftKings has also announced a partnership with basketball legend Michael Jordan and secured its first Major League Baseball deal with the Chicago Cubs.
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