We recently published a list of 10 Best Sports Betting Stocks to Buy Now. In this article, we are going to take a look at where DraftKings Inc. (NASDAQ:DKNG) stands against the other sports betting stocks.
A U.S. Supreme Court decision in 2018 set off a sports betting boom that legalized wagering in 38 states and the District of Columbia. North Carolina legalized sports betting on March 11, and within the first 12 hours of the law’s implementation, the state wagered a remarkable $23.9 million. Of these, 30 states allow online sports betting, so if you’re within state lines, the thrill is only a click away. While most states have a minimum age of 21, a handful allow 18 or older.
Consumers can now bet from anywhere as long as they are physically present in the state due to the growth of online platforms. As a result, Americans legally wagered a record $119.84 billion on sports in 2023, up 27.5% from 2022, per the American Gaming Association’s Commercial Gaming Revenue Tracker, ushering in a new era for sports gambling in the US. Consequently, the sports betting industry’s revenue grew to $10.92 billion, a 44.5% YoY increase from 2022. The expansion was predominantly driven by continuing maturation in most existing markets as well as some new ones, including Massachusetts and Ohio. The trend is expected to continue, and in the second quarter of 2024, American sports wagerers wagered $31.75 billion. Revenue from it was $3.16 billion for the quarter, increasing 35.3% from the previous year.
While the United States is at the top of the Biggest Gambling Countries in the World, there are still 12 states in the US that do not allow legal sports betting, including California, Texas, Idaho, Utah, Minnesota, Missouri, Alabama, Georgia, South Carolina, Oklahoma, Alaska, and Hawaii.
Nonetheless, sports betting is one of the fastest-growing industries in the world. Jane Bokunewicz, director of the Lloyd Levenson Institute at New Jersey’s Stockton University, which studies the gambling industry, points out that legal sports betting could be appealing to people with limited discretionary budgets since it offers a new and inexpensive form of entertainment.
Goldman Sachs Research also states that the U.S. sports betting market is expected to grow significantly and, once it reaches maturity, could reach $45 billion each year. This growth will be prompted by new state openings and a growing share of consumer spending on sports betting, per Ben Andrews, head of leisure and travel research at Goldman Sachs in Europe, where legal sports betting has a longer history.
When it comes to consumer spending on sports betting, gambling interest reflects a sport’s popularity, with NFL football dominating in the United States. In 2023, over 73 million Americans said they planned to bet on the NFL season, which is almost 60% more than the previous season, according to a survey conducted by the American Gaming Association.
Globally, nearly one-third of people worldwide engage in sports betting at some point in their lives, based on the TGM 2022 Global Gambling and Sports Betting Survey. In 2021, 17% of people bet on sports with friends (mainly on football and horse racing), while 35.44% bet on sports, and 20.2% bet online/through applications.
According to Deloitte’s 2024 Sports Industry Outlook, generative AI is projected to dramatically impact sports betting in the next 12-18 months. The way sports fans interact with sports betting will probably undergo a revolution because of innovations in domains like personalized betting experiences, odds calculation, real-time data analysis, and improved prediction models.
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A woman at a betting table paying out customers who won their sports bets.
DraftKings Inc. (NASDAQ:DKNG)
Number of Hedge Fund Holders: 56
As a pioneer in daily fantasy sports, DraftKings Inc. (NASDAQ:DKNG) was founded in 2012. Then, in response to a 2018 Supreme Court decision allowing states to authorize online sports wagering, the company entered the online sports and casino gambling markets. Rising to the top of the North American sports betting and iGaming business, it now shares a 70% revenue share with FanDuel.
Approximately 40% of Canadians can now access DraftKings’ online or retail sports betting in 25 states, as well as its iGaming offerings in seven states. In addition, the company creates and licenses online gaming items and runs a non-fungible token commission-based marketplace.
While adjusted EPS of $0.22 exceeded forecasts, the company announced Q2 2024 revenues of $1104 million, a 26.2% YoY rise driven by organic growth factors, and new market entries slightly missed Wall Street projections. DKNG stock was down almost 4% following the Q2 2024 results, despite decent performance.
The company improved its revenue projection for 2024, but because of higher client acquisition costs and an Illinois tax rate change, it reduced adjusted EBITDA.
By 2030, Morningstar analysts believe that the online gambling giant will be in a strong position to take advantage of the $40 billion sports betting and iGaming income opportunity in North America. Nonetheless, there is fierce rivalry amongst online gaming companies, as some states have over twenty state licenses.
Benchmark recently maintained a Buy rating on the shares and increased the company’s price objective for DraftKings Inc. (NASDAQ:DKNG) from $41 to $44. According to the analyst, DraftKings is still “a top idea for 2024.” The stock is expected to have a “strong run” until year-end, given that shares have dropped 2% thus far this year. The analyst notes that DraftKings’ improved outlook “creates an attractive entry point,” driven by greater market win margins in Q3, new user growth, traditional tax reduction techniques, and valuation contraction ahead of the NFL season.
Ravitch and Jeffrey Sine’s Raine Capital Joseph is the largest shareholder in the company, with 1,382,603 shares worth $52.77 million.
Overall DKNG ranks 1st on our list of the best sports betting stocks to buy. While we acknowledge the potential of DKNG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DKNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.