DraftKings Hits Touchdown With NFL Week 1, Intercepted By Deion Sanders, Colorado

Sportsbook operator DraftKings Inc DKNG reported quarterly financial results in August, shortly before the kick-off of the NCAA Football and NFL football seasons.

An analyst sizes up the early reaction to the start of college football and the first weekend of NFL games and what it could mean for DraftKings.

The DraftKings Analyst: Needham analyst Bernie McTernan has a Buy rating and a price target of $44 on DraftKings.

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The Analyst Takeaways: The 2023 National Football League season kicked off Thursday with a matchup between the Detroit Lions and Kansas City Chiefs. Weekly promotional activity for sportsbook, app rankings and the results of the first week’s matchups are sized up by McTernan.

“In the app store, DKNG starts the year out on the top spot, similar to last year when it held the lead for the first three weeks of the season over FanDuel,” McTernan said.

The analyst notes that PointsBet, which saw its U.S. division acquired by Fanatics, saw a “significant move higher” in the app store rankings. PointsBet is offering a free $150 Fanatics FanCash promotion for a $50 bet on the sports betting platform.

McTernan said promotional offerings from sportsbooks are down to start the 2023 NFL season, compared to past years. Bet365 is the most aggressive with $365 in bonus bets for customers, versus a past offer of $200. DraftKings and FanDuel are offering $200 in free bets to kick off the NFL season.

Another item on the mind of McTernan is the NCAA Football early results with the University of Colorado likely causing some pain for sportsbooks.

Colorado, now led by former NFL star Deion Sanders as the head coach, won its first two games and is seeing strong betting activity.

Colorado was predicted to win less than four games at the start of the season and now finds itself half way to the season total after two games and ranked among the top 25 teams. Benzinga previously reported that several bettors placed large wagers on Colorado at other sportsbooks to start the season.

“Typically, we focus on game results for the NFL season, but Coach Prime and the University of Colorado had another win (and cover) on Saturday, which was a significant liability for the sportsbooks.”

McTernan said most sportsbooks had 85% of money on Colorado based on media reports. Betting activity on Colorado was also at or above the level of several NFL teams.

Turning to the first week of the NFL season, McTernan said sportsbooks should have a good first week.

“We think game results should mean a good week for the sportsbooks with two of the top five underdogs winning outright and unders hitting at a 70% rate, suggesting headwinds to player props.”

What’s Next: One item that caught the analyst’s attention was the integration of the Yahoo fantasy sports app with BetMGM, a sports betting platform co-owned by MGM Resorts International MGM.

“We believe this is the first year of this level of integration between the two operators. We think it shows a framework for what ESPN Bets could be, relative to general investor skepticism of the tech integration.”

McTernan said Yahoo and BetMGM have had a media partnership since 2019, but integration looks to have increased this NFL season.

The analyst notes that the integration could show what Penn Entertainment PENN could look to do with its new licensing agreement with ESPN, a unit of The Walt Disney Company DIS. Penn Entertainment will launch the ESPN Bet sportsbook, rebranded from Barstool Sportsbook, later this year.

McTernan said ESPN has over 10 million unique fantasy sports players and the integration could expand the sports betting market. ESPN ranks as the top app on the iOS app store in the sports category compared to Yahoo’s third place ranking for the past week.

“We see DKNG as a leader in the emerging North America online gambling market, a $35B market opportunity,” McTernan said. “We see upside to our bull case industry TAM for $50B, for which we see a higher likelihood playing out than our bear case of only $18B.”

The analyst expects DraftKings to have a first or second place market share position in all its states and territories it operates in.

DKNG Price Action: DraftKings shares are up 0.2% to $21.92 on Monday versus a 52-week range of $10.70 to $34.49.

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Image: DraftKings