DraftKings (NASDAQ: DKNG) has been identified as the premier online betting stock to own heading into football season by analyst Chad Beynon from Macquarie. As football is the most wagered-on sport in the US, the season typically boosts online sports betting equities, including DraftKings. Beynon emphasized that the company could resolve some of the hold issues that have impacted its previous fourth quarters.
“While history has shown that holding the stock for the two months leading up to opening NFL week has been most profitable, we think much of the 4Q stock softness in recent years can be attributed to DKNG’s hold falling 50-100bps below market expectations for September through December,” Beynon wrote. “Given current 3Q hold/ growth trends, an easier year-over-year hold comp in 4Q, and recently recalibrated ’24 guidance, we think DKNG is well positioned to exceed expectations in 2H.”
Beynon maintained an “outperform” rating on DraftKings with a $50 price target, suggesting an upside of more than 42% from current levels. Despite shares of DraftKings declining 3.33% over the past month, Beynon’s analysis points to football seasonality not yet being priced into the stock. The 2024 college football season begins this Saturday, with the NFL season starting on Thursday, Sept. 5.
Adding to the positive outlook for DraftKings and its competitors is the prediction that this year, bettors will engage in more NFL contests than in previous years. With a record number of states now allowing sports wagering, the overall football handle is expected to grow. Furthermore, operators have expanded their betting menus, including in-game wagering and same-game parlays, which could boost per bettor figures.
These trends underscore why online gaming is perceived as the long-term growth driver of the gaming industry. The possibility of more states adopting iGaming strengthens this perspective. Beynon added, “Thus, we view any pullback in the sector from consumer sentiment, regulatory headlines, or low hold as a long-term buying opportunity, with much of the sector now generating positive free cash flow at reasonable valuations.”
Other factors to watch as the football season progresses include the performance of competitors like Fanatics and Penn Entertainment’s ESPN Bet against larger rivals FanDuel and DraftKings. The 2024 football season is viewed by some as crucial for ESPN Bet, while others are monitoring how Fanatics will fare amid potentially higher promotional spending.
Key questions highlighted by Beynon include: whether Missouri residents will vote to legalize online sports betting with a proposed 10% tax rate in November, whether DraftKings will close the gap between its handle and GGR market share, whether Fanatics will maintain its recent market share gains during the promotion-heavy NFL period, how ESPN Bet will monetize its active user base and manage its New York launch, and whether BetMGM will benefit significantly from having one digital wallet across states.
 rated "outperform" with a $50 target ahead of football season, promising upside with expanded betting options and positive growth trends.){kind=link}