DraftKings Stock Has Massive Upside as Recent Expansion Efforts Kick In


Online-gaming giant DraftKings (NASDAQ:DKNG) has been a growth machine in the past year, expanding its revenue base more than 73%. It has kept up the pace during the first half of the year, growing its top-line by over 250%. Moreover, its plans to acquire Golden Nugget Online Gaming (NASDAQ:GNOG) will accelerate its commercial expansion. Simply put, DKNG stock is an attractive long-term buy with a spectacular growth runway ahead.

DraftKings (DKNG) logo on a phone
Source: Lori Butcher / Shutterstock.com

Led by visionary CEO Jason Robbins, DraftKings plans to become an online gambling juggernaut. The goal is continually to improve the robustness of its platform through the use of artificial intelligence and data analysis.

It can generate massive cash flows, given its aggressive growth strategy and remarkably high margins. Moreover, it will benefit from strong secular tailwinds as the U.S. sports betting market is expected to grow by roughly 289% by 2025.

To be sure, DKNG stock has moved sluggishly in the past few months — down 4.88% compared to the 10.5% gain in the Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ) — but remains an incredible bet over the long term. DraftKings shares are the sixth-biggest holding in the gaming stocks exchange-traded fund’s 42-name portfolio.

What To Expect for DKNG Stock From Golden Nugget Deal

As mentioned earlier, DraftKings will be acquiring Golden Nugget Online to solidify its iGaming presence further. The transaction will be wrapped up by the first quarter of 2022 in an all-stock contribution worth $1.56 billion from DraftKings. DKNG stock holders will have 93.4% ownership of the pro-forma company.

The acquisition will add 5 million users to DraftKing’s base. Apart from the commercial benefits, the transaction will also reduce platform costs and enable more effective technology deployment. Additionally, the deal will result in a sizeable, $300 million in synergies which will help in lowering DraftKing’s losses. Golden Nugget generated a healthy $58.4 million in sales during the first half of this year, which amounts to a 10% addition in DraftKing’s revenue base.

Looking ahead, with its acquisition of Golden Nugget and online gaming growth, DraftKings has the potential to grow at a significantly faster rate than the current sales estimates. The market currently projects $1.77 billion in revenues for next year and $2.43 billion for 2023.

Focus on Technology and NFTs

DraftKings is investing heavily in improving its platform to provide the best experience to its users. In the first six months of this year, the company invested roughly $400 million in improving its technological capabilities. Though it had a negative impact on margins, management expects these measures to pay off in the long run, resulting in higher profits.

Furthermore, DraftKings appears to be going all-in on its NFT plans after partnering with a top NFT platform called Autograph. Some of the biggest names in sports, including Tiger Woods, have partnered with the platform. American sports icons Derek Jeter and Tom Brady sold 10,000 NFTs, respectively, on the DraftKings Marketplace in collaboration with Autograph.

By partnering with the biggest names in the sporting world, the company is drawing more and more users to its platform. DraftKings offers an unmatched betting platform already, and when you combine that with its recent success in the NFT business, it is likely to have a bumper third and fourth quarter. However, DraftKings cannot letup though and needs to retain its users to have the upper hand over its peers.

The Bottom Line on DKNG Stock

DraftKings has been killing it since the return of live sports, and its management forecasts a strong end to the year. DKNG stock should reflect that in the near term.

Its acquisition of Golden Nugget will add to its to already impressive customer base and create massive synergies. Moreover, through its investments in technological prowess, the company will continue to tread forward at a breathtaking pace.

Hence, DKNG stock is a long-term investment that has tremendous upside potential.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.


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