Can DraftKings Keep Its Competitive Edge While Growing?

The large online sports betting and iGaming markets has an analyst impressed with the opportunity for DraftKings to keep its competitive advantage and grow with the market.

The DraftKings Analyst: Guggenheim analyst Curry Baker initiated Draftkings Inc DKNG with a Buy rating and a $75 price target.

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The DraftKings Takeaways: The online sports betting market could reach $26 billion in the U.S. according to estimates from Baker. The analyst assigns a market size of $44 billion to the nation's iGaming market.

“Beyond the momentum towards legalization and the inherent tailwinds new states/market offer, we see several other competitive advantages underpinning our positive outlook for DraftKings,” Baker said.

The analyst calls out a market leading position in OSB and iGaming already in place for DraftKings, a premier brand and a proprietary technology platform.

DraftKings could have an opportunity for North American revenue of $7.6 billion to $10.6 billion by 2025 according to Baker. The assumption comes from 70% of the U.S. population having access to online sports betting and 30% having access to iGaming.

“The momentum towards legalization appears to be building in almost every state,” Baker noted.

DraftKings currently reaches 25% of the U.S. population for online sports betting and 10% for iGaming. It has online sports betting live in 12 states, which is more than any other competitor, and has iGaming live in four states.

The company has an existing 30% share of online sports betting and 19% share of iGaming.

“The company’s DFS, OSB and iGaming products are consistently ranked as top of mind and preferred by consumers,” Curry stated.

Over 60% of active daily fantasy sports players have been cross-sold into online sports betting or iGaming into the first 12 to 18 months of a state legalizing online sports betting.

DraftKings is working on switching over to SBTech, a technology platform it owns that can power its back-end.

“DraftKings’ proprietary tech stack drives multiple areas of differentiation: data driven marketing optimized for a player’s LTV, vertical integration of SBTech delivers in-house OSB product control, and tech platforms are scalable, providing a first-mover advantage as markets legalize,” the analyst said.

DKNG Price Action: Shares of DraftKings are down 2.02% to $56.31 at publication Friday afternoon.

(Photo: DraftKings)