DraftKings Shares Skyrocket Thanks To Bets On Table Tennis, Korean Baseball – Forbes


TOPLINE

Since going public last month, shares of daily fantasy and sports-betting company, DraftKings, have jumped over 50% as online gamblers bet on everything from video games and a charity golf match to table tennis and Korean baseball.

KEY FACTS

Despite there being virtually no live sports to bet on, DraftKings went public on April 24 through a reverse merger, and the stock has skyrocketed since.

Last week, DraftKings posted a wider-than-expected loss of 18 cents per share on revenue of $113 million in the first quarter, which topped analyst expectations; the company says it doesn’t expect any long-term impact on its business from the coronavirus.

In the absence of professional baseball, hockey or basketball, sports bettors have turned to video games and esports. “It’s been a huge growth area over the last couple months for us,” CEO Jason Robins said last week.

DraftKings is benefiting from an uptick in demand for gambling on all kinds of events outside of U.S. sports including pop culture, news, reality TV shows and foreign sports like Russian table tennis and Korean baseball. A charity golf match with Tiger Woods, Peyton Manning, Phil Mickleson and Tom Brady has also drawn big bets.

DraftKings saw record numbers of engagement during the NFL Draft last month and has also seen strong interest in Ultimate Fighting Championship events, the company said. It’s expecting an increase in demand as events like NASCAR and German Bundesliga soccer make a return.

Wall Street analysts are quite bullish on the stock: Five of them give it a “buy” rating, while just one gives it a “hold” rating. Most firms assign DraftKings, which currently trades for just over $29 per share, a price target of between $30 and $35 per share.

Crucial quote

“I think what it shows you is there’s a lot of pent-up demand for sports,” Robins said during the company’s earnings call last week. “People are hungry for sports to come back.”

Chief critic

Goldman Sachs
GSBD
, one of the first major Wall Street banks to initiate coverage of the stock, is lukewarm on DraftKings. Analyst Stephen Grambling acknowledges that it will be an undisputed leader in U.S. sports betting but also warns of valuation concerns. With the stock up over 50% from its public offering, Grambling suggests the stock may have limited upside, and that investors should wait for a pullback before buying. The company has about $450 million in cash to sustain a loss of $15 million to $20 million per month while major sports leagues are suspended.

Surprising fact

The company sports a market valuation of $9.4 billion—that’s more than major casino operators Wynn Resorts
WYNN
($9.2 billion) and MGM Resorts International ($7.7 billion). “Wall Street is valuing DraftKings like an internet or cloud play,” Barron’s writes of its valuation. DraftKings now has the second-highest market value out of any U.S. gambling company, behind only Las Vegas Sands
LVS
, at $37.8 billion.

Further reading

Soaring DraftKings Stock Makes Israeli Entrepreneur A Billionaire (Forbes)

DraftKings Digs Deep To Keep Bettors Interested, With Major Sports Halted By Coronavirus (Forbes)

DraftKings Announces Plans To Go Public In 2020 (Forbes)

Illinois Supreme Court Ruling Is A Big Win For Daily Fantasy Sports (Forbes)

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