On paper, DraftKings (NASDAQ:DKNG) shareholders should feel pressure from a new competitor in the publicly traded sports betting scene. Earlier on Monday, Flutter Entertainment (NYSE:FLUT) made its U.S. trading debut on the New York Stock Exchange (NYSE) under the ticker symbol FLUT. Previously, shares were traded over the counter. Theoretically, the added attention could draw investment funds away from DKNG stock. However, this ecosystem might not be a zero-sum game.
According to a Seeking Alpha report, Flutter — which owns the daily fantasy sports and U.S. sportsbook brand FanDuel — believes the NYSE listing should “enhance the company’s profile stateside.” As well, it may help the recruitment and retention of top American talent and give the enterprise access to much deeper capital markets and new domestic investors. Further, the new listing should provide overall greater liquidity in FLUT shares.
Inherently, the fresh competition may cause concern for stakeholders of DKNG stock. Obviously, with only so many investor funds available, moving to one sportsbook business could negatively impact the other. Adding to the heat in the kitchen, Jefferies analyst David Katz believes Flutter’s transition to a U.S.-listing should be a positive near-term catalyst for FLUT.
Still, it might not be the end of the road for DraftKings.
DKNG Stock Could Still Come Out on Top
At a quick glance, the naysayers of DKNG stock appear to have a point. So far, Flutter shares gained over 1.5% in its NYSE debut. Since the beginning of the year, its market value increased by over 19%. Further, with the expansion of online betting platforms, along with increased advertising and media coverage, the competition for consumer dollars may only intensify.
However, it’s also important to note that DKNG stock gained over 1% in the afternoon session. And its year-to-date performance of 16% up closely tracks Flutter’s price action. And that helps underscore the contrarian argument that this town is more than big enough for the two players.
For one thing, Grand View Research points out that the global sports betting market reached a valuation of $83.65 billion in 2022. Further, analysts anticipate that the sector will expand at a compound annual growth rate (CAGR) of 10.3% by 2030. At that point, the space could be worth $182.12 billion. And the U.S. sportsbook market itself could enjoy a CAGR of 13% between 2024 and 2028.
In other words, competition alone might not be enough to negatively impact DKNG stock due to vast market opportunities. Perhaps most importantly, market efficiencies may allow DraftKings shareholders to breathe a sigh of relief.
To Citizens JMP Securities’ analyst Jordan Bender’s point: “These companies trade off of valuation, they’re worth something. So, for people to say, ‘we need incremental capital to go buy Flutter stock and it’s going to only come from DraftKings,’—there’s just really not the evidence to say that.”
Why It Matters
Other analysts believe that DraftKings commands a dominant position in the U.S. sportsbook market, and their strong buy consensus view demonstrates exactly that. Only one analyst rates DKNG stock as a sell. Otherwise, 26 experts disagree, pegging it a buy alongside two holds. Overall, the average price target lands at $42.38, implying about 9% upside potential.
On the date of publication, Josh Enomoto 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.
