DraftKings, one of the most popular online sportsbooks in the US, was added to the semiyearly growth stock list by Morgan Stanley strategists. Interestingly, DraftKings was the only representative from the gaming stock segment to be listed.
DraftKings Stands Out Among Stock Options
Morgan Stanley is one of the biggest investment banks in the US and its list is divided into two sections – companies that represent the technology, telecommunications and media industries and, on the other side, companies that don’t belong to those industries. In the case of companies such as DraftKings, they belong in the consumer discretionary sector.
On Morgan Stanley’s list, there were a total of 26 companies that belonged in the second group. As mentioned, DraftKings was the only company from the gaming sector. The bank shared that, by switching to a mid-cycle environment, the equity market multiples, as well as non-basic payments for structural growth, will be lowered. It added that rates with an upward trend of several years may change long-duration equities as the valuations may be challenged.
Secular growth companies manage to thrive in their respective sector, regardless of the recent economic changes. DraftKings’ debut on Nasdaq was in April 2021; hence its public enterprise is short. But, that did not stop it from being successful, as it managed to navigate through COVID-19 and come out on top.
The iGaming Market Will Continue to Grow
The main reason why DraftKings and other companies that are related to the iGaming industry are connected to long-term investments is that this market is on the rise lately. Many US states are looking to legalize all forms of online gambling, including betting on sports, which is also a good thing as the industry will continue to rise.
The estimates on how big of a profit those operators, including DraftKings, can make, vary, and Morgan Stanley had its say. According to the bank, the market for online gambling and betting on sports was worth $3 billion in 2020. That number will likely increase five times by 2025 and reach $15 billion that year.
Thomas Allen, a Morgan Stanley analyst, adds that DraftKings will have a market share of around 25%. That will be due to the fact that DraftKings can attract new customers far easier as the operator is cheaper than its peers by a third. Its stocks have risen by 6% year-to-date, which, compared to the S&P 500, is relatively low. The latter recorded a 17.67% rise in stocks.
DraftKings Below Wall Street Consensus
Currently, DraftKings is trading at 40% below the Wall Street consensus target. Additionally, by taking a look at its 52-week high, the stock is 33.68% below that point. But, it is important to mention that the price rose by 12.65% in the previous week, even though the operator experienced small setback recently.
DraftKings is currently looking to expand its portfolio by including media and tech acquisitions. This is a smart move because it can pay off long-term, but also because it allows DraftKings to rise in other sectors aside from betting on sports. After all, FanDuel holds 50% of the US sports betting market.