DraftKings Hit with Rare ‘Sell’ Rating as Roth Capital Prefers Penn, Rush Street Interactive
Posted on: October twelve, 2021, 09:17h.
Final up to date on: October twelve, 2021, 09:17h.
Wall Street analysts are broadly bullish on DraftKings (NASDAQ:DKNG) stock, but Roth Capital’s Edward Engel is among the dissenting voices.
In new coverage of multiple gaming names right now, the analyst tags DraftKings with a “sell” rating and a $41 cost target, which implies downside of about sixteen percent from the Oct. 11 near. Engel’s call comes as shares of the on-line sportsbook operator are off 21.74 percent more than the previous month.
The analyst’s bearish see on DraftKings revolves all around two main points: The more and more aggressive nature of the domestic sports wagering landscape and waning rewards from converting day-to-day fantasy sports (DFS) consumers into sports betting consumers.
We really do not believe DraftKings’ 20 percent to 25 % marketplace share is sustainable as mid-tier peers ramp consumer acquisition and much better cross-promote land-primarily based databases,” mentioned the analyst. “While we believe an industry-top product produces some market place share positive aspects, we see positive aspects from DFS fading above time and DraftKings losing marketplace share, especially in iGaming.”
Prior to Engel’s phone, 26 analysts covered DraftKings — 18 of which have bullish or very bullish ratings on the stock. His value forecast is effectively below the Wall Street common of $70.11.
DraftKings, Other Huge Players Vulnerable tom Competitors
While FanDuel, BetMGM and DraftKings – the leading 3 on the internet sportsbook operators in the US — enjoy enviable brand recognition — Engel believes the industry is ripe for other gamers to acquire industry share.
“While we’re bullish on U.S. on the web gaming, we don’t believe 70 % market share for the three leaders (Fanduel, BetMGM, DraftKings) is sustainable and see DraftKings conceding marketplace share as mid-tier operators ramp buyer acquisition and greater cross-sell legacy casino clients,” explained the analyst.
1 of the contenders that could pilfer marketplace share from the big 3 is Penn Nationwide Gaming (NASDAQ:PENN), which operates the Barstool Sportsbook. Penn doesn’t spend as significantly on marketing and advertising and customer acquisition as its aforementioned rivals do. Rather, it leverages Barstool Sports personalities and its established media footprint to make sports wagering organization whilst it’s utilizing its myChoice consumer loyalty plan to bolster its online casino market share.
“We feel Barstool and myChoice supply the most effective and complementary client acquisition channels in On-line Gaming. Even though investors are concerned with Penn’s potential to bring On-line Sports Betting engineering in-residence, we see an chance to adapt a hybrid model where Penn leverages an evolving ecosystem of highly specialized risk and trading functions from emerging third-party B2B services providers,” explained Engel.
The analyst has a $107 cost target on Penn, implying 40 % upside from the Oct. eleven near. Penn is also pulling expansion levers. In August, the operator mentioned it is having to pay $two billion in money and equity to acquire Canada’s Score Media and Gaming (NASDAQ:SCR). Final month, it exposed a six.27 % stake in Australia’s PointsBet (OTC:PBTHF).
Bullish on Rush Street Interactive, As well
An additional identify Roth’s Engel likes in the iGaming room is Rush Street Interactive (NYSE:RSI).
The analyst calls RSI the most attractive chance in the domestic company-to-buyer internet gaming arena. He rates RSI a “buy” with a $24 cost forecast. That is about twenty percent greater than exactly where the shares closed on Monday.
The stock is on a torrid speed, soaring much more than 80 percent in excess of the past 90 days as speculation intensifies it is a takeover target.