On Tuesday, DraftKings (DKNG) will host its 2021 Investor Day, and Oppenheimer analyst Jed Kelly has made a list of items to look out for.
The analyst expects the company to provide a positive update on the pace of SBTech’s integration into the platform. Kelly thinks it is “critical for new product capabilities.”
Unlike FanDuel and BetMGM, the DKNG platform doesn’t offer same-game parlay, which Kelly believes is due to its use of Kambi, which has left DraftKings with no control over its back-end infrastructure.
“We believe a case can be made that FanDuel promoting single-game parlay is a key reason the operator is generating strong share gains in NJ over the last three months,” Kelly noted.
New Jersey is one of OSB’s (online sports betting) “mature states” and Kelly thinks investors will be keen to get some insight into contribution profit forecasts and cohort data.
“We suspect iGaming cross-sell has been strong,” Kelly said, noting that 70% of Michigan – another mature state – OSB players had a go at iGaming in January.
Another issue to look out for will be for DKNG’s updated TAM (total addressable market) outlook. Here, Kelly thinks the recent noises made by management indicate the outlook for potential participants is set to rise.
Last year, DraftKings’ estimates put the OSB market at a TAM of $11.7 billion, while iGaming was expected to reach $6.3 billion.
But taking FanDuel as a point of comparison, Kelly points out that based on LTV (lifetime value) trends and favorable legislation, last month, FanDuel raised its 2025 estimate for the OSB/iGaming TAM from $7 billion and $2 billion, respectively, to $12.2 billion and $5.3 billion. Kelly’s current estimates for 2025’s TAM stands at $11.5 billion and $6.9 billion, respectively.
Additionally, Kelly also sees the possibility of “accretive M&A opportunities,” which could include payment processing, media, iGaming, or “other tuck-ins that could offset margin pressure from an increasing OSB mix.”
Lastly, pertaining to the recent Dish TV collaboration which will allow viewers access to the DraftKings app, Kelly hopes the company will further discuss integration plans and potentially offer a “comprehensive media strategy.”
All in all, there’s no change to Kelly’s rating which stays an Outperform (i.e. Buy). The analyst’s $80 price target remains, too, suggesting upside of 32% over the coming months. (To watch Kelly’s track record, click here)
The majority of Street analysts are also betting on DraftKings’ continued success. DKNG’s Moderate Buy consensus rating is based on 14 Buys, 6 Holds and 1 Sell. The average price target clocks in at $70.55, implying gains of 18% could be in the cards in the year ahead. (See DKNG stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
