The MLB season has swung into action, with 4 million viewers tuning in on opening day, 8% above 2017’s previous record and 200% higher than last year’s viewing figures. The trend continued into the season’s second match, which brought in the highest viewing figures ever for a late game (2.8 million).
The return of professional sports has obviously satiated a need among fans. With viewing confined to the comfort of one’s home, the demand could lead to an increase in online sports betting (OSB). Rosenblatt analyst Bernie McTernan expects DraftKings (DKNG) to reap the benefits of this trend.
States in need of extra income appear to be warming to the idea, too, with reports indicating Massachusetts is the latest state to consider OSB legislation. The addition could help boost ailing budgets, especially in states with negative net positions such as Massachusetts. Other struggling states could follow as well; those with a negative net position include California, New York, Connecticut, Maryland, and Hawaii among others.
So, what could it mean for DraftKings? Currently, the online sports betting company has access to 12% of the population, and McTernan assumes DKNG will add roughly 10% of incremental OSB penetration per year. By 2025, DraftKings could reach 65% of the population. With more states open to the idea of legislation, it sets up DKNG to reap the rewards. According to McTernan, this presents investors with an opportunity.
The 4-star analyst said, “We expect strong OSB trends through the remainder of 2020 given the sports hiatus driving pent-up demand and a condensed sports calendar… We believe this is an attractive entry point to own DKNG shares as sports are restarting and COVID-19 is straining state budgets, which we believe will be a catalyst to accelerate sports gambling legislation as states look for additional revenue sources.”
Accordingly, McTernan has a Buy rating on DraftKings to go with a $60 price target. The implication for investors? Upside potential of 73%. (To watch McTernan’s track record, click here)
The rest of the Street concurs. 1 lone Hold rating is swamped by a resounding 10 Buys, all adding up to a Strong Buy consensus rating. With an average price target of $47, the analysts see possible gains of nearly 36% to be taken home over the next year. (See DraftKings stock analysis on TipRanks)
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