DraftKings (NASDAQ: DKNG) Sports Betting Leader with Big Growth Potential
DraftKings is one of those stocks that many investors might be underestimating right now, especially given the current market environment. Despite the Federal Reserve’s recent rate cut signaling economic uncertainty, there are compelling reasons to consider adding DraftKings to your portfolio. Here’s why this online sports betting company is worth a closer look.
DraftKings’ stock is still trading well below its peak, down 46% from its 2021 highs and currently 16% off its 52-week high set in March. This pullback presents a unique entry point, especially considering that analysts are still optimistic. The average 12-month price target is $49.62, suggesting a potential upside of nearly 25% from current levels.
DraftKings isn’t just about sports betting anymore. The company has expanded into online casino games, offering another revenue stream that complements its sportsbook business. This move opens up a second profit center, providing a broader base for growth. The online casino market itself has been gaining traction, with revenues up 32.5% year-over-year as of July. Despite only being live in seven states, the online casino segment is already making a dent in traditional brick-and-mortar gambling, which could drive even more growth as more states consider legalization.
Growth prospects for DraftKings remain robust. Last quarter, revenue surged 26% year-over-year, and the company raised its full-year guidance, expecting revenue growth of 38% to 43% in 2024. DraftKings also anticipates EBITDA of between $340 million and $420 million this year, with a target of up to $1 billion next year. As DraftKings continues to establish itself in new markets, profitability tends to improve as marketing costs decrease and customer loyalty builds.
Looking ahead, the broader industry outlook is also promising. Goldman Sachs estimates that the U.S. sports betting market could grow from $10 billion today to $45 billion at its peak, while the online casino market in the U.S. is expected to grow to $13.7 billion by 2027, surpassing the U.K. as the world’s largest.
While DraftKings may not be a core holding for every portfolio due to its relative newness and volatility, it presents a strong growth opportunity for those looking to add some upside potential. With expanding markets, multiple revenue streams, and a stock that’s still trading at a discount, DraftKings is well worth considering.
