Online sports betting companies are changing the way people experience sports. DraftKings is a daily fantasy sports company that has made the most of the pandemic. Through its suite of applications, it has gained a large market share and has become a prominent name in the sports betting industry. With online betting and iGaming legalization across states in the United States, DraftKings (NASDAQ:DKNG) is constantly growing and making the right moves to grab a large piece of the pie. DKNG stock is certainly enjoying the attention. I have always been bullish on the stock.
DKNG stock has had quite a ride, it went from $9 in 2018 to $42 in June 2020 and $64 in August 2020. It dipped slightly and regained strength in March 2021 when it hit an all-time high of $74. DKNG stock is trading close to $50 today.
I believe the company could become one of the biggest sports betting companies in the U.S. and it will certainly push DKNG stock to new highs. With that in mind, let’s take a look at the investment case for DKNG stock.
Massive market opportunity
As per the DraftKings’ Investor presentation, the gaming market is estimated at around $456 billion and this includes gaming machines, lotteries, casinos, and sports betting. This means DraftKings has massive space to grow. Several countries are showing regulatory changes towards the legalization of sports betting and iGaming. Due to the pandemic, a lot of sports events could not take place and this is when people turned towards online sports betting. The industry got a push as states began legalization online sports betting. The U.S. sports betting market is expected to be worth $23 billion.
As per the investor presentation, the total addressable market is more than $70 million. Although it will take time to reach 100% legalization, but it is not too far. As states open up sports betting, DraftKings’ will continue to grow and expand. It is already a market leader across several states and the financials are proof that the company is on the right path.
Strong Fundamentals
For Q1 2021 results, the company reported revenue of $312 million, beating Wall Street expectations. It represented a 253% growth year over year. The company has raised expectations for the remaining year. It is looking at revenue in the range of $1.1 billion as compared to $950 million in the previous guidance. The company has a cash balance of $2.8 billion which provides enough liquidity support for strategic alliances and marketing activities.
It is good to see that the investment made in marketing is paying back. The monthly unique players have increased 114% year on year. The average revenue per monthly unique player has also increased to $61, repressing a 48% increase year over year. Once the economy reopens, sports will return and we will see a significant improvement in the gross margins of the company.
Wall Street loves DKNG stock
I am not the only one bullish on DKNG stock. The Wall Street agrees with me. Out of 22 analysts on TipRanks, 17 have a buy rating and 5 have a hold rating with an average price target of $69.
Last month, Cathie Wood’s Ark Investment bought 146,969 shares of DKNG.
The Bottom Line
DraftKings is set to achieve huge numbers this year. Despite not being profitable, it is constantly investing in new technology and products which helps increase the user base. It has completed strategic partnerships that have led to growth and massive popularity.
The company has a strong balance sheet and a massive market opportunity. With legalization across states, it is only going to soar higher. DKNG stock is a solid investment that will reap strong returns in the future. The company is firing on all cylinders and growing rapidly.
Place your bets on DKNG and hold for the long term.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
