Morgan Stanley strategists recently released their semiannual list of secular growth stocks, and sports betting giant DraftKings (NASDAQ: DKNG) appeared.
The stocks were classified into two groups those which reside in the media, telecommunications, and technology industries and those that are not a member of those groups. Gaming stocks are classified as a consumer discretionary sector.
DraftKings, which some observers say is richly valued in the sports betting market appeared on Morgan Stanley’s list. It is the only gaming stock that managed to the list.
“We believe the transition to a mid-cycle environment will lower equity market multiples and the premium paid for structural growth- a process that is underway- while a multi-year upward trend for rates may challenge valuations in long-duration equities.”
Secular growth companies are those that seem to thrive despite what is happening in the broader economy. Though DraftKings has a short life in public trading, the operators have navigated the rough coronavirus environment with ease.
DraftKings and its peers’ long-term investment forecast center around the state-level legalization of online sports and casino betting. Morgan Stanley is positive about US sports and online gambling.
Analyst Thomas Allen forecast that DraftKings will achieve 25 percent of market share due to its ability to acquire customers. DraftKings has legacy gambling infrastructure and tech that features betting events such as daily fantasy sports.
However, DraftKings is succumbing to a broader gaming space this year. Its shares are up by just six percent year-to-date and below 17.67 percent gain by S&P 500. Its stock is also residing 40 percent below the consensus Wall Street price target and below its 52 weeks high. However, the name jumped 12.65 in the past week.