Sports wagering stocks, including DraftKings (NASDAQ: DKNG), form a relatively young asset class, but despite their youth, they exhibit clear seasonal trends. Notably, the start of the football season often acts as a catalyst for these stocks. This makes sense, as football is the most wagered-on sport in the United States. The upcoming 2024 football season will mark DraftKings’ fifth year as a public company. Over the past four NFL campaigns, the stock has averaged a 5% gain from the start of the season to the Super Bowl, according to Dow Jones Market Data.
DraftKings stock has recently been a battleground, but the shares might already be factoring in optimism for the football season. This is evidenced by a 10.69% gain over the past week. Some analysts believe the recent downturn in the gaming stock could signal a buying opportunity in anticipation of the NFL season.
With the 2024 NFL season starting on September 5th and DKNG’s share price down 32% from its $50 high in March, this year’s potential return over this seasonally significant window could be meaningful, according to Benchmark analyst Mike Hickey. He reiterated a “buy” rating on DraftKings with a $44 price target, implying an upside of 26.4% from the current closing price. Hickey called the gaming stock a “top idea.”
Football and a robust free cash flow path are among the potential catalysts for DraftKings, and there may be more to the story. “DKNG’s improved outlook, fueled by stronger market win margins in Q3, new user growth, traditional tax mitigation strategies, and valuation contraction ahead of the NFL season, creates an attractive entry point,” Hickey added.
However, the biggest obstacle to the stock’s near-term upside could be public opinion. Recent news surrounding DraftKings has been largely negative. This includes a now-scrapped plan to tax winning bets in select high-tax states, a move abandoned seemingly because rival FanDuel did not follow suit. Additionally, the gaming firm is shutting down its non-fungible token (NFT) marketplace and halting the Reignmakers fantasy sports game due to legal issues. DraftKings also recently sold the Vegas Sports Information Network (VSiN), and it’s rumored that the sale price was significantly lower than the $70 million initially paid for the radio network in 2021.
“DraftKings has turned into a battleground stock,” wrote Needham analyst Bernie McTernan in a recent report.
Despite the contentious environment, Wall Street remains largely optimistic about DraftKings. “Within this market, we believe DKNG has a sustainable customer acquisition strategy that should maintain its first- or second-place position in all states,” McTernan noted. “We expect margins to scale with benefits from tech stack ownership, national versus local marketing, and reaching terminal market access penetration.”
In a report released earlier this week, Oppenheimer placed DraftKings on its list of top equity ideas for August and September. The firm highlighted 32 stocks that could outperform over the next year. “The company will be a critical player in accelerating the shift in U.S. sports betting from about $150 billion wagered illegally/offshore to licensed domestic operators,” Oppenheimer said of DraftKings.
 stock shows promise as NFL season kicks off. Despite recent challenges, analysts see significant upside potential driven by market trends.){kind=link}