DraftKings (DKNG) operates the nation’s largest publicly traded online gaming and sports betting network, with 20-40% market share across the 26 states where legalized betting is approved, observes Adam Johnson, a leading growth stock specialist and the editor of Bullseye Brief.
Active users have more than tripled since 2019, driven by new products unique to DraftKings and more states voting to issue gaming licenses. Online sport betting accounts for the vast majority of revenue, though new online gaming and lottery offerings could drive significant future upside. Pending state approvals could provide additional avenues for growth.
Notably, the stock fell 90% from lockdown-driven during 2022, but has since recovered half the loss. Triple-digit growth could catalyze a return to old highs and potentially drive further gains. DraftKings is a best-in-breed operator, well-positioned to capture a larger share of a growing pie.
The company is best known for its fantasy sports league offerings, whereby users build their own franchises and profit when their individual players outperform. All major league sports are included on the fantasy platform. Users can also place bets on specific outcomes in states where online gambling is permitted.
What sets DraftKings apart is flexibility — being able to hand-pick your own team, being able to bet from your phone, and being able to gamble anywhere, anytime. These are all significant advantages for users.
For investors, DraftKing’s online-only, asset-light structure has a much lower operating cost, and therefore higher profitability. DraftKings will pivot to full-year profitability this year, generating an expected $490M in EBITDA and $0.31 in earnings (vs. a loss of $1.27 last year).
I like owning DKNG within the upward channel in place since late 2022. Since the stock has popped on its recent strong earnings report, I’ll buy half initially and save ammo for a pullback.
My target of $79 reflects peer multiples applied to DraftKing estimates for 2026. Since growth is accelerating triple digits and the company will achieve profitability this year, my estimated doubling of the share price may ultimately prove conservative.
