DraftKings (DKNG) has been one of Wall Street’s biggest standouts of 2020, with shares skyrocketing over 230%. The biggest question for investors, then, is whether those gains are likely to continue. Rosenblatt analyst Bernie McTernan came out with an answer.
McTernan “continues to be bullish on DKNG,” after recent data pointed to positive trends in the online gaming space. The analyst believes “investors should use the recent pullback in shares, likely related to near-term uncertainty of sports returning, as a buying opportunity, especially for those with long-term time horizons.”
iGaming momentum in New Jersey, the primary established sports betting market in the US, is showing no signs of slowing down. In June, industry revenue increased by 123%, mirroring April and May’s growth. However, the growth at Resorts Digital, which includes DraftKings, has outpaced the industry. Compared to April and May when it grew at the same rate, revenue was up by 148% in June.
Despite a difficult sports schedule that’s severely handicapped by the coronavirus, sports gambling revenue showed signs of a turnaround in June, as year-over-year growth returned for the first time since February.
McTernan argues “this shows the market is eagerly awaiting the return of major professional sports.” NBA action is set to resume on July 30, while the MLB will get going beforehand, on July 23. As basketball made up roughly 20% of the 2019E New Jersey handle (the total amount of bet money), and baseball accounted for approximately 15%, the resumption of major sports should ensure the growth continues.
But, what does it all mean for the biggest game in town – namely the investing one? All in all, McTernan reiterated a Buy recommendation on DKNG shares, along with a $60 price target. The implication for investors? Potential upside of a very impressive 68%. (To watch McTernan’s track record, click here)
McTernan’s positive sentiment is mirrored across the Street, where based on 10 Buys and 1 Hold, DKNG has a Strong Buy consensus rating. With an average price target of $47, the analysts project upside potential of 38% over the next 12 months. (See DraftKings stock analysis on TipRanks)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.