DraftKings (NASDAQ:DKNG) stock rose 4% overnight after JPMorgan gave shares an “overweight” rating and told investors to buy a recent dip. Analyst Joseph Greff called gambling an “appealing sector” of the market.
DraftKings has traded as high as $32 per share this month but recently fell to around $28 per share. DraftKings is up more than 150% year-to-date (YTD). Shares opened this morning, Sept. 26, at $28.50 per share and a market capitalization of $13 billion.
DKNG Stock: You Better, You Bettor, You Bet
DraftKings began life as a fantasy football site but quickly pivoted to sports betting after a Supreme Court decision opened the door for states to start legalizing the practice.
While sports betting is not legal everywhere and only a few states have legalized it online, DraftKings’ value is comparable to that of the biggest casino companies. Caesars Entertainment (NASDAQ:CZR), for instance, has a market cap of $10 billion. MGM Resorts International (NYSE:MGM) is worth $13 billion. The biggest gambling player remains Flutter Entertainment (OTCMKTS:PDYPY), a European sports betting company worth $29 billion.
The beginning of the American football season — and consistently high ratings on football — have excited investors as well as gamblers. The stocks, however, have been held back by the cost of marketing for new gamblers.
DraftKings cut its costs by signing a deal with Disney’s (NYSE:DIS) ESPN unit, but ESPN moved to non-exclusive deals, then put its name on the sports betting unit of Penn Entertainment (NASDAQ:PENN) for $2 billion in cash and warrants. DKNG stock is down more than 10% since the Penn-ESPN deal was announced.
Of course, ESPN is the biggest owner of sports rights, but it’s not the only game in town. Paramount Global (NASDAQ:PARA), Comcast (NASDAQ:CMCSA) and Warner Brothers Discovery (NYSE:WBD) have all been beefing up their sports departments.
Meanwhile, online gambling is a common feature of European sport, where it’s a $47 billion business that’s predicted to grow at a compound annual growth rate (CAGR) of 11% between 2023 and 2028. The U.S. online sports betting market is estimated at $7.6 billion but is expected to grow at a CAGR of around 17% between 2023 and 2027.
What Happens Next?
These are still early days for U.S. sports betting. Investors can expect many deals and wild days ahead.
On the date of publication, Dana Blankenhorn did not hold (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.
