DraftKings (DKNG) - Get Report is "best positioned to capitalize" on the growth of digital/sports wagering in the U.S., according to a Jefferies analyst, who initiated coverage of the online sports-betting site with a buy rating.
Shares of the Boston company at last check were up 0.8% to $42.34.
Analyst David Katz, who has a $55 price target on the stock, said in a note to investors said that online sports betting is in the initial stage of a "decade-long acceleration" and is projected to reach $19 billion by 2023-2025.
"We expect that post-covid, the engagement with digital leisure, the pent-up appetite for sports and political realities should position DraftKings to accel," Katz said. "What’s more, our proprietary survey supports the view that sports betting is a highly social endeavor more so under current circumstances."
Katz said the political disposition toward expansion of sports betting and internet gaming is increasingly favorable, the demand from consumers is proven, and technology is advancing the execution.
The analyst says momentum in New Jersey and established daily fantasy sports in other states should drive market share as new markets open.
Katz said he was also bullish on “in-game wagering,” or wagering on a game while it's happening.
"The comparisons between this aspect of sports betting in other global markets and retail-driven legacy markets in the U.S. suggest that it could be larger than expected," he said.
"We support this view with our proprietary survey, which indicates a high percentage of interest in in-game and definitively higher budgets as a result of expanded offerings."
Last week, DraftKings said it planned to sell 33 million additional shares as its stock price has more than doubled since the company went public in April.
DraftKings will offer 14 million Class A common shares to the public and an additional 19 million shares to current stockholders.
An additional almost 5 million shares will be granted to underwriters, the company said. Goldman Sachs and Credit Suisse are handling the stock sale.
In May, DraftKings posted a first-quarter loss that was wider than a year earlier as the sports world came to a full stop amid the coronavirus pandemic, halting sports-betting activity with it.