DraftKings remains firm despite new competition in the sportsbook market.

Posted on: December 15, 2023, 06:51h. 

Last updated on: December 15, 2023, 06:51h.

The US sports wagering landscape is awash in new, well-heeled competitors, but DraftKings (NASDAQ: DKNG) is proving to be resilient. Its strong position in the market is holding steady, despite challenges from fresh entrants.

DraftKings stock
A DraftKings billboard appears at Times Square in New York City after the company went public in April 2020. The operator is gaining iGaming and sports betting market share, says an analyst. (Image: NASDAQ)

DraftKings and Flutter Entertainment’s FanDuel continue to assert dominance as the primary forces in US online sports betting. Together, they control over 70% of the market. Challenges from newcomers such as Fanatics and Penn Entertainment’s ESPN Bet are appearing, but DraftKings remains steadfast.

DraftKings cited no immediate impact from the ESPN Bet launch, and sees potential for the offering to grow the market,” wrote Stifel analyst Jeffrey Stantial in a report to clients.

Stantial recently met with DraftKings executives and recommends the stock “hold” with a $40 price target, suggesting a 13.1% increase from today’s close at $35.35.

DraftKings Proving Resilient Against ESPN Bet

Fanatics and ESPN Bet are the most discussed recent sports betting newcomers. With the two companies’ substantial resources, they pose a challenge to well-established entities such as DraftKings and FanDuel.

Amidst the growing number of states embracing regulated mobile sports wagering, DraftKings and other companies are opting for judicious spending, as some entities struggled to generate profits after heavy expenditures for market share. As a result, some operators scaled back operations or exited the market.

Fanatics and ESPN Bet could see different long-term outcomes. Despite ESPN Bet’s rapid start, DraftKings has not shown signs of being impacted in the states where they compete against each other.

“Encouragingly, DraftKings has seen little impact to their customer base, noting comparable user churn & spending patterns during November and early December in states where they compete against ESPN Bet vs. states where ESPN Bet is not yet live,” added Stantial.

This situation may indicate that ESPN Bet is capturing market share from competitors or that it is enhancing the overall sports betting market.

iGaming, Product Development Could Boost DraftKings in 2024

Despite a slight stock decline, DraftKings has tripled in value year-to-date. The company’s investors are now eager to know the next steps. This puts pressure on DraftKings to offer catalysts to keep market participants engaged with the stock in 2024.

New product offerings such as the Pick6 fantasy game and progressive parlays, along with increasing iGaming share, can provide these needed catalysts. Favorable legislative outcomes in 2024 could further aid in DraftKings’ growth.

“We remain constructive on the fundamental outlook for DraftKings, as same-state online sports betting & iCasino growth remains healthy, product mix drives net gaming revenue & margin upside, 2024 shows promise for new state legislation, and DraftKings continues to demonstrate resilience to new competition,” concluded Stantial. “However, valuation is demanding, and we remain cautious on potential iCasino market share deconsolidation. Hence we reiterate Hold, though remaining opportunistic on pullbacks.”

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