DraftKings Inc. (NASDAQ: DKNG) stock charged ahead on Wednesday after the online gambling firm received a very bullish call from a key analyst. Note that this particular analyst is perhaps the most bullish on the street and is calling for roughly 100% upside.
Credit Suisse reiterated a Buy rating for Draft Kings with a $76 price target, implying an upside of 103% from the most recent closing price of $37.47. This call is way above the consensus analyst price target is $58.74, and it is in fact the street-high target.
The firm said in its third-quarter preview that it would be adding DraftKings on weakness, in what the firm feels is reasonably low expectations and a positive event path. The stock has sold off recently due to an abundance of supply: two lock up expirations and a secondary offering.
Credit Suisse further detailed:
We would be adding to the stock here in what we feel is an underappreciated event path: (1) 2 Masters events (November and April) and The Match III (Mickelson and Charles Barkley vs. Peyton Manning and Steph Curry). Previously, the Match II was the highest grossing golf event ever for DKNG, (2) we think the final Jan 5th expiration could act as a clearing event for the stock after an extended period of supply and (3) an accelerating sports betting/iGaming opportunity in Ontario, Canada, that has flown under the radar.
The firm thinks there could be news around expanded legalization soon, which could be a catalyst for sentiment and street estimates. With a population of about 14.5 million, Ontario is a large and underappreciated sports betting/iGaming opportunity potentially worth $1 billion.
Excluding the addition of any new states, Credit Suisse thinks 2021 sports betting revenues will be “roughly $300 million + DFS of about $170 million + iGaming of $200 million + SBTech of $135 million, for a total of $800 million.”
Credit Suisse cites some risks, noting that the company is reliant on more states legalizing iGaming/sports betting to grow revenue. Also, sports betting revenue depends on a functioning U.S. sports industry, which could be affected further by the COVID-19 pandemic.
DraftKings stock traded up about 6% to $39.85 on Wednesday, in a 52-week range of $10.04 to $64.19.
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