DraftKings has lost two-thirds of its value since September. Morgan Stanley says it’s a good bet.
Investors who have are looking to buy a dip should look toward DraftKings (DKNG) – Get DraftKings Inc Class A Report, according to a bullish Morgan Stanley note.
DraftKings’ chart shows the stock has dropped from an early September high in the mid-$60s to its current level in the low-$20s, but the Boston sports-gambling company remains one of the top dogs in its market. Morgan Stanley’s note says the opportunity is “too big to ignore.”
“While we and the market have been focused on near-to-medium-term profit concerns, we believe at the current price, one should not
ignore that DKNG is a leading-market-share player in what will be a very large
profitable market,” said analyst Thomas Allen, who upgraded the stock to overweight from equal weight with a $31 price target.
New York State Jumps Into Sports-Betting Fray
The catalyst for the improved outlook on DraftKings, and the sports gambling space as a whole, is data that New York state released for its first eight days of legal online sports betting.
Morgan Stanley notes that the implied market revenue run rate for the state is $1.9 billion, more than triple the investment firm’s previous estimate of $600 million for 2022. The previous run-rate figure was $1 billion for 2025.
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The top players in sports gambling have a firm hold on the New York marketplace, a trend that Morgan Stanley expects to continue nationally.
DraftKings, MGM, Caesars Battle for New York Sports Bettors
Morgan Stanley also says the barrier to entry in online gambling is high, which provides more protection for DraftKings.
Barriers to entry into online are lower than they are for in-person, but “gambling in general is a profitable business,” Allen notes.
DraftKings Invests to Help States Fight Gambling Addiction
“For online, there are
numerous public companies globally that have margins ranging from 15% to 40%,
despite similarly operating in competitive markets,” the analyst wrote
DraftKings shares at last check were 16% higher at $22.31.
