By Sam Boughedda
Piper Sandler analysts initiated DraftKings (NASDAQ:DKNG) at Overweight with a $21 per share price target in a research note Friday.
They labeled DraftKings as the leader in the online sports betting market "with a growing presence in iGaming, which combined represent an $80 billion TAM between the United States and Canada."
"With profitability expectations reset after the initial 2023 guide, we believe current levels represent an attractive long-term entry point, particularly with the risk of a future capital raise largely diminished. Furthermore, while we understand the profitability scrutiny in the current environment, we feel it somewhat misses the forest for the trees, as investors would likely be questioning the broader market opportunity if the company were profitable in Q4 2022," they explained.
On betting legalization, the analysts said the firm continues to see a steady cadence of legalization over the next few years across states, providing further growth momentum for DraftKings.
"In addition, DraftKings is consistently one of the top three operators across the majority of the states it is live, with these major players typically controlling ~80% of the share. We believe DraftKings will continue to be a share gainer over time," they added.
They concluded that the firm view the company's "investments in social, media, and rewards as key drivers of engagement and retention."
"Overall, we recommend investors own DraftKings for exposure to the rapidly growing online sports betting and iGaming markets."