• Fri. Sep 24th, 2021

DraftKings Amongst Secular Development Shares Highlighted by Morgan Stanley


Jul 26, 2021

Posted on: July 25, 2021, 04:51h. 
Final up to date on: July 25, 2021, 05:18h.

Todd Shriber Learn Extra

Morgan Stanley strategists not too long ago up to date their semiannual lists of secular progress shares, with on-line sports activities betting juggernaut DraftKings (NASDAQ:DKNG) making the reduce.

DraftKings marketed on the Nasdaq market website. Morgan Stanley calls the inventory a secular progress story. (Picture: Nasdaq)

The financial institution divides the record into two teams: Firms residing within the media, know-how, and telecommunications industries, and people who aren’t members of these teams. Gaming shares are normally labeled as members of the patron discretionary sector.
Morgan Stanley turned up 26 names residing outdoors the media, tech, and telecom areas that match the invoice as secular progress tales. DraftKings, which some market observers say is richly valued relative to sports activities betting market prospects, made the Morgan Stanley record. It’s the solely gaming inventory to take action.

We consider the transition to a mid-cycle surroundings will decrease fairness market multiples and the premium paid for structural progress — a course of that’s underway — whereas a multi-year upward pattern for charges might problem valuations in long-duration equities,” in accordance with the financial institution.

Secular progress firms are outlined as people who thrive no matter what’s occurring within the broader economic system. Whereas DraftKings’ life as a public enterprise up to now is brief — its Nasdaq debut was in April 2020 — the operator navigated the tough coronavirus sports activities surroundings with stunning ease.
One other Essential Forecast
For DraftKings and its friends, a lot of the long-term funding thesis on these names facilities on extra state-level legalization of on-line casinos and sports activities wagering, and the way giant these markets can develop to be. Relating to whole addressable market, estimates differ. However Morgan Stanley is bullish.
“We count on US sports activities betting and on-line playing to go from a $3 billion market in 2020 to $15 billion in 2025,” mentioned analyst Thomas Allen. “We forecast DraftKings reaching 25% market share, supported by the power to amass clients ~one-third cheaper than friends, given its legacy each day fantasy sports activities database and supporting tech infrastructure.”

Whereas it’s certainly one of a small variety of pure play iGaming and sports activities betting equities, DraftKings is succumbing to broader weak point within the gaming area this yr, because the shares are up simply six % year-to-date, in comparison with a 17.67 % achieve for the S&P 500.

DraftKings inventory resides about 40 % under the consensus Wall Avenue value goal and 33.68 % under its 52-week excessive. Nevertheless, the identify did soar 12.65 % final week.
DraftKings Outlook Vivid, However Competitors Is Fierce
Boston-based DraftKings is making an assortment of strikes to diversify its product portfolio and create income stream past each day fantasy sports activities (DFS), iGaming, and sports activities wagering. These embody media and know-how acquisitions and moving into digital asset courses.
These actions might repay in the long term, as a result of the net sports activities betting enterprise is hyper-competitive and dear by which to amass and retain clients.
By some estimates, FanDuel, not DraftKings, controls near half the US on-line sports activities wagering market, confirming the latter is wise to make strikes in different arenas.

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