Posted on: October 12, 2021, 09:17h.
Past up-to-date on: Oct 12, 2021, 10:30h.
Wall Street analysts are broadly bullish on DraftKings (NASDAQ:DKNG) stock. But Roth Capital’s Edward Engel is amongst the dissenting voices.
In new coverage of many gaming names today, the analyst tags DraftKings with a “sell” rating and a $41 price target. That indicates draw back of about 16 p.c from the Oct. 11 near. Engel’s contact will come as shares of the on the web sportsbook operator are off 21.74 per cent in excess of the past thirty day period.
The analyst’s bearish see on DraftKings revolves about two most important details: The progressively competitive nature of the domestic sports wagering landscape, and waning gains from changing everyday fantasy sports activities (DFS) customers into sports activities betting consumers.
We don’t consider DraftKings’ 20 p.c to 25 % industry share is sustainable, as mid-tier friends ramp consumer acquisition and greater cross-sell land-dependent databases,” explained the analyst. “While we feel an marketplace-foremost merchandise generates some market place share benefits, we see rewards from DFS fading around time and DraftKings shedding market place share, significantly in iGaming.”
Prior to Engel’s simply call, 26 analysts included DraftKings — 18 of which have bullish or really bullish rankings on the stock. His rate forecast is properly underneath the Wall Road common of $70.11.
DraftKings, Other Major Gamers Susceptible to Opposition
FanDuel, BetMGM and DraftKings – the top rated 3 online sportsbook operators in the US — delight in enviable manufacturer recognition. But Engel believes the industry is ripe for other gamers to acquire current market share.
“While we’re bullish on US on the net gaming, we do not feel 70 % market share for the a few leaders (FanDuel, BetMGM, DraftKings) is sustainable, and see DraftKings conceding marketplace share as mid-tier operators ramp consumer acquisition and much better cross-provide legacy on line casino buyers,” stated the analyst.
1 of the contenders that could pilfer market share from the big 3 is Penn Countrywide Gaming (NASDAQ:PENN), which operates the Barstool Sportsbook. Penn doesn’t expend as a great deal on advertising and shopper acquisition as its aforementioned rivals do. Somewhat, it leverages Barstool Athletics personalities and its founded media footprint to produce sports wagering organization when it is employing its myChoice shopper loyalty application to bolster its on the web on line casino marketplace share.
“We think Barstool and myChoice offer the most effective and complementary customer acquisition channels in On-line Gaming. Even though investors are anxious with Penn’s skill to deliver Online Sports activities Betting know-how in-dwelling, we see an prospect to adapt a hybrid design where Penn leverages an evolving ecosystem of extremely specialized threat and buying and selling functions from rising 3rd-bash B2B service companies,” stated Engel.
The analyst has a $107 price tag goal on Penn, implying 40 per cent upside from the Oct. 11 close. Penn is also pulling enlargement levers. In August, the operator said it’s spending $2 billion in dollars and equity to acquire Canada’s Rating Media and Gaming (NASDAQ:SCR). Previous month, it exposed a 6.27 percent stake in Australia’s PointsBet (OTC:PBTHF).
Bullish on Hurry Avenue Interactive, Too
An additional name Roth’s Engel likes in the iGaming space is Hurry Street Interactive (NYSE:RSI).
The analyst calls RSI the most appealing option in the domestic small business-to-purchaser internet gaming arena. He premiums RSI a “buy” with a $24 cost forecast. That’s about 20 p.c increased than in which the shares closed on Monday.
The inventory is on a torrid pace, soaring far more than 80 percent in excess of the earlier 90 days as speculation intensifies it’s a takeover target.