DraftKings Rises on Barclays Upgrade as US Growth Potential Gains Attention

Shares of DraftKings (NASDAQ: DKNG) soared in early trading on Friday following an upgrade from Barclays analyst Brandt Montour, signaling renewed investor confidence in the gaming equity. Montour’s decision to elevate DraftKings to an “overweight” rating from “equal weight,” coupled with an increased price target of $50, reflects a bullish outlook on the stock’s potential, with an implied upside of 22.4% from the previous day’s close.

The rally comes amidst a broader trend of positive sentiment surrounding DraftKings, as evidenced by recent analyst upgrades and price target adjustments. Approximately 10 analysts have revised their price targets upward in the past week alone, with the consensus price objective now standing at $46.82, implying a further 11.29% upside from current levels.

Montour’s upgrade underscores DraftKings’ resilience and growth prospects in the fiercely competitive US sports wagering industry, where it, along with rival FanDuel, maintains a dominant position, controlling approximately 70% of the market. While acknowledging increased competition, Montour highlights DraftKings’ “staying power” in the sports betting arena, as well as its underappreciated leadership in the iGaming space.

Furthermore, Montour sees DraftKings’ recent acquisition of online lottery provider Jackpocket as a strategic move that could fuel incremental growth. The $750 million cash/stock deal, expected to close in the second half of the year, is poised to strengthen DraftKings’ position in both the lottery and online gaming segments, enhancing its customer acquisition capabilities and cross-selling opportunities.

Additionally, Montour points to the growing popularity of parlays, including same-game parlays, as a key driver of DraftKings’ profitability. These multi-leg wagers, favored by novice bettors seeking big payouts, contribute to the operator’s revenue growth and hold, further bolstering its financial outlook.

In conclusion, Barclays’ upgrade of DraftKings reflects a positive outlook on the company’s growth trajectory and market position, signaling confidence in its ability to capitalize on the expanding US sports betting and iGaming markets. As DraftKings continues to solidify its presence in these sectors and explore new avenues for growth, investors are increasingly optimistic about its long-term prospects.