The biggest takeaway of 2020 is the sports betting legalization that has spread across several U.S states. DraftKings (NASDAQ:DKNG) is one of the top players in the online betting industry. It is a digital sports entertainment and gaming company that offers retail sports wagering and online daily fantasy contests. Since its debut in April 2020, DKNG stock has already pleased shareholders.
I recommended a buy during December, and I continue to be bullish on the stock. After the 2020 presidential election, and with more states approving sports betting legalization, DraftKings is set to change the game.
DKNG stock hit an all-time high of $74 in March and is currently trading around $59. The Massachusetts headquartered DraftKings is priced to perfection and on its way to profitability. The stock is a buy with a potential to grow your money. With that in mind, let’s take a look at the investment case for DKNG stock.
The Future is Bright for DKNG Stock
DraftKings had an impressive quarter and the Q4 results show that the company is on its path towards generating high revenue and profits. The losses are declining and stood at $2.76 per share in 2020. The losses will go below $2 in 2021 and further down in 2022, as players and revenues increase. The number of players on DraftKings increased by 44% to 1.5 million during last year. This has also led to an increase in the average revenue per user which soared 55% in the blowout quarter.
Interestingly, the company already holds $1.8 billion in cash and it recently announced a $1 billion offering. It will also issue $150 million convertible notes to the purchasers of the original unsecured notes. The fund will be used for corporate purposes and working capital.
The company mentioned in a statement that the amount could also be used towards funding mergers and acquisitions and investments that the company identifies in the future.
The company is already making the right moves and has made impressive deals with sports broadcasting networks, leagues, and individual teams that has led to a boost in its market share. With the additional funding, it will gain high liquidity and could possibly make big moves with mergers.
DKNG stock enjoyed an exceptional 2020 and is bringing a lot more to the table in 2021. The investor presentation mentioned that the market share for iGaming is at a run rate of 19% and for online sports betting is 30%. With favorable state legislation, DKNG is only moving forward.
It will be interesting to see how DKNG stock performs once things go back to normal. With the vaccines rolling out and businesses reopening, DKNG will have a stronghold in the market and its revenue will clearly shine. Despite the pandemic, DKNG is right where all the action is.
Wall Street Loves DKNG Stock
ARK Innovation recently added 949,200 shares of DKNG and they are not alone. Wall Street analysts are bullish on the stock. Goldman Sachs analyst Stephen Grambling maintained a buy rating and increased the price target to $87. Grambling stated that the combination of favorable legislation and adoption of online sports betting amongst consumers will drive growth in the U.S. Further, Jefferies analyst David Katz also raised the price target to $75 with a Buy rating.
Out of the total 23 analysts on TipRanks, 16 have a buy rating with a target price of $72.77. The stock is poised for growth and ready to deliver substantial returns.
The Bottom Line
DKNG stock underperformed despite the strong earnings and positive outlook. It also declined due to the lockup expiry but this is temporary. DKNG stock is taking a much-needed rest before it soars high. The shares might be down now, but not for long.
With a market cap of $23.8 billion, the stock is priced for perfection.
Time to bet big on DKNG stock and enjoy some great returns.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.