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Posted on: July 25, 2021, 04:51h.
Final up to date on: July 25, 2021, 05:18h.
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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 lower.
DraftKings marketed on the Nasdaq market web site. 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 categorized 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 imagine 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 development for charges could problem valuations in long-duration equities,” in accordance with the financial institution.
Secular progress corporations are outlined as people who thrive no matter what’s taking place within the broader financial 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 Necessary 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 complete addressable market, estimates fluctuate. However Morgan Stanley is bullish.
“We anticipate 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 attaining 25% market share, supported by the power to accumulate clients ~one-third cheaper than friends, given its legacy day by day fantasy sports activities database and supporting tech infrastructure.”
Whereas it’s considered one of a small variety of pure play iGaming and sports activities betting equities, DraftKings is succumbing to broader weak point within the gaming house this 12 months, because the shares are up simply six p.c year-to-date, in comparison with a 17.67 p.c acquire for the S&P 500.
DraftKings inventory resides about 40 p.c under the consensus Wall Road worth goal and 33.68 p.c under its 52-week excessive. Nevertheless, the identify did leap 12.65 p.c final week.
DraftKings Outlook Shiny, However Competitors Is Fierce
Boston-based DraftKings is making an assortment of strikes to diversify its product portfolio and create income stream past day by day fantasy sports activities (DFS), iGaming, and sports activities wagering. These embrace media and know-how acquisitions and stepping into digital asset courses.
These actions might repay in the long term, as a result of the web sports activities betting enterprise is hyper-competitive and dear wherein to accumulate and retain clients.
By some estimates, FanDuel, not DraftKings, controls near half the US on-line sports activities wagering market, confirming the latter is sensible to make strikes in different arenas.
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