Gaming experts have been trying to make functional sense of why DraftKings’ stock ($DKNG) is performing so well. Of course, there are logical reasons. Perhaps the lack of access to betting before 2018 has had people itching to get their sports betting fix. Or maybe money-hungry tycoons are seeing dollar signs every time a millennial talks about sports betting.
What experts are saying, though, is that DraftKings is the stock everyone else is chasing.
DraftKings is a company flush with cash
Companies are defined by how deep their pockets are, and DraftKings is flush with cash.
Not only did the company report $1.2 billion in cash and no debt, but it also sold 32 million shares at $52, raising over $1.6 billion. Factor in all the partnership deals the company is securing, and you get a pretty desirable stock.
The InvestorPlace research staff writes, “Flush with cash and with plenty of growth, DraftKings is attractive over the long term.
“Consensus estimates call for just over $526 million in revenue this year and about $770 million next year. If both numbers are in line, that represents over 46% growth.”
Big names and lucrative TV deals mean nothing to the average gambler. DraftKings may have added Michael Jordan as a special adviser and secured several partnerships, including a deal with WarnerMedia, but these things are meaningless to most consumers.
The only things gamblers care about are the best odds, free promotions and better returns. Who’s an investor or what channel the betting lines are on is irrelevant. Sure, there may be an ounce of brand loyalty in there somewhere, but loyalty can crumble and fans can turn on you in an instant.
Howard Klein, publisher of the House Edge, summed it up best by saying, “Michael Jordan for DraftKings brings empty-calorie value.”
Time will determine the ultimate value of DraftKings
Legal sports betting is only two years old. To say DraftKings is the best sportsbook company and most attractive stock of all time is foolish. But the company is off to a hell of a start.
DraftKings is already the leader in multiple markets, including sports betting and daily fantasy sports. There is a possibility that soon, it could be a leader in online gaming and online casino games too. (DraftKings Casino is part of its arsenal, after all.)
But how long until we can provide a fair assessment of DraftKings stock? Experts say in at least three years or when there are 22-24 states with legal sports betting.
We are very close to the second one. Currently, 18 states have legal sports betting, but DraftKings only operates in a handful of them.
But we must remember that sports bettors are fiends. They migrate from site to site like a symbiotic organism, consuming the best promotions and changing the odds in the process. They are out to make money, so if the house crumbles in their wake, a new company will be waiting with open arms.
One month, the DraftKings Sportsbook and $DKNG stock is the top performer; the next, it’s Barstool Sportsbook and $PENN.
For more, check out my first article in this series: What Experts Are Saying About Penn National.