A top online sports betting platform, DraftKings (NASDAQ:DKNG) has been in the news for the right reasons. The Massachusetts based company has a market cap of $24.1 billion and has delivered strong returns over the year. DKNG stock is up 11% in 2021 and trades for just under $52.
Investors believed that the stock could soar in the football season but it has not seen such highs. Over the past month, the stock has gone from $51 to $60 and back to $51. I do not see it surging high in the near future.
But I believe DKNG stock has a long run and the stock is the one to buy and hold. DraftKings has been making strong moves in the industry with acquisitions and partnerships and its fundamentals are impressive. It benefited from the solid Q2 results and I think the stock is a buy.
Let’s dig deeper into the investment case of DKNG stock.
Solid Cash Balance To Fuel Growth
DraftKings has a solid cash balance that helps it achieve its marketing efforts. It has a small debt and a balance of $2.6 billion in cash in June. The company has increased its cash burn by a huge amount last year and it is for the mergers and acquisitions that have taken place. The solid cash balance gives management the confidence to spend in marketing activities and partner with strong companies through mergers.
The revenue numbers and solid liquidity balance suggest that the company is on the right path and it will be able to continue to use cash for marketing activities. We may see more mergers and acquisitions in the coming quarters. As long as the company does not have debt, it is possible to use the cash to expand its business. DraftKings is well capitalized and there is nothing to worry about its cash position for the near future. The company has already raised the revenue guidance for 2021.
It recently made a $20 billion offer to Entain (OTCMTKS:GMVHY), a U.K.-based online sports betting company. It is a stock and cash offer. Entain recently rejected an all-stock offer from MGM Resorts (NYSE:MGM) worth $11 billion. It believed that the deal undervalued the company. However, there is no confirmation on this deal yet.
Analysts Love DKNG Stock
I am not the only bullish on DKNG stock. Wall Street analysts share my opinion. Ben Chaiken, a Credit Suisse analyst, has an outperform rating on the stock with a price target of $85 after a successful start to the football season. Further, Loop Capital analyst Daniel Adam has a buy rating on the stock with a price target of $105. The analyst stated that DraftKings has recently overtaken Flutter Entertainment’s (OTCMKTS:PDYPY) FanDuel as the top sportsbook app in the U.S. as per Apple App Store rankings.
Daniel Politzer, an analyst at Wells Fargo initiated coverage of the stock with an overweight rating and a price target of $73. The analyst is of the opinion that DraftKings enjoys a leading position in internet gaming and there is a potential upside to the share of iGaming.
The Bottom Line
Considering the growth that DKNG stock has shown, it is worth betting on. With several analysts having a bullish take on the stock, I think it is worth adding to your portfolio. The company is expanding its market and the NFL season could work in its favor.
The company has strong fundamentals and holds a stellar position in the industry. It has everything necessary to achieve growth and success in the coming quarters.
As states continue to legalize online betting, DKNG stock is the one to own. With analysts estimating the price to go as high as $105, there is plenty of upside potential on the stock.
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.
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 analyses.