Analysts Say DraftKings is the Premier Choice for an Online Sportsbook in the North American Market

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• DraftKings delivered impressive Q2 results and forecast 2025 revenue at the high end of its previously disclosed forecast
• Analyst sees “long structural hold runway” and leading in-game betting platform

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Analysts say DraftKings is the premier choice for an online sportsbook in the North American market. DraftKings (NASDAQ: DKNG) gave back some of its post-earnings gains recently, yet Wall Street remains optimistic about the shares of this internet casino and online sportsbook giant.

In a note to clients, Macquarie analyst Chad Beynon highlighted that DraftKings is the best way to engage with the North American online wagering market, remarking that the company’s second-quarter results only bolster that confidence.

“DKNG has a long structural hold runway which, coupled with handle market share gains and its superior in-play offering, positions DKNG for strong top- and bottom-line outperformance in the near future,” observes Beynon, who rates the stock as “outperform” with a price target of $55, up from $53.

In the June quarter, Boston-based DraftKings recorded revenue of $1.51 billion, achieving a 37% year-over-year increase, along with net income of $158 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $301 million—both quarterly records. As of now, the stock is on course for a slight weekly decline, potentially due to profit-taking following a substantial gain of 22.26% over the past three months.

DraftKings Attractively Valued on Some Metrics

In nearly five years as a publicly traded entity, it has been rare for DraftKings to be seen as an inexpensive stock when evaluated by metrics such as price-to-earnings. This is understandable as it is a growth stock, often commanding premium valuations.

Interestingly, Beynon noted that based on enterprise value/EBITDA and free cash flow (FCF), DraftKings trades at significant discounts to certain members of the S&P 500.

“Current 2025 guidance suggests a 24x EV/EBITDA and a FCF of 3% (expected to rise to FCF yields of 5%/7% in ’26E/’27E). We observe S&P 500 companies with projected 2024-26E revenue growth rates of 15-20% trade at 31x 2025E EBITDA and a 2.5% FCF yield,” adds the analyst.

Although DraftKings hasn’t yet made it to the S&P 500, its market cap of $22.51 billion along with increasingly consistent profitability could see it included in the crucial index over the medium term. In contrast, FanDuel parent Flutter Entertainment (NYSE: FLUT) appears to be the most likely gaming stock to join the index soon.

DraftKings is a Catalyst-Rich Story

DraftKings is up 16.18% year-to-date, but this does not mean there is a lack of future upside. Instead, there are various potential tailwinds for investors to consider, including an attractive valuation, the company’s commitment to share buybacks, and the upcoming football season.

“DKNG is a leader in the rapidly expanding US Online Gaming sector,” concludes the Macquarie analyst. The analysis suggests that the company, having transitioned to profitability, is well-positioned for double-digit revenue growth moving forward.

Key Takeaways

• DraftKings currently enjoys a solid market position in North America.
• Consistently strong financial results indicate promising growth ahead.
• Analysts predict continued profitability and market share expansion.

In summary, DraftKings stands out as a prominent choice in the North American betting market, driven by its innovative products and robust market strategies. Analysts are optimistic regarding its future, cementing its reputation as a pioneer in the online gaming industry.

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