UBS analyst Robin Farley predicts that DraftKings Inc. shares, which have already more than doubled this year, could see another significant increase of 45%. Farley emphasizes that the company's continued success will be driven by improved parlay mix, stronger customer retention and engagement. As a result, DraftKings will be able to increase its "hold" or the portion of betting money it retains, while also gaining significant market share.
One key factor driving growth for DraftKings is the upcoming National Football League (NFL) season. Farley points out that DraftKings was not operational in Massachusetts and several other states during the previous NFL season, but now the company has a strong presence in these regions.
Furthermore, Farley dismisses concerns regarding competition from Penn Entertainment Inc. and Walt Disney Co.'s ESPN. In August, ESPN announced that Penn would be rebranding its sportsbook as ESPN Bet. Despite this, Farley believes that DraftKings has a competitive advantage due to its compelling product and its ability to effectively compete against well-known brand names.
It is worth noting that DraftKings had previously allocated about 5% of its annual marketing budget, roughly $40 million to $50 million, on ESPN. However, Farley suggests that this indicates that DraftKings likely sources less than 5% of its players from ESPN. Therefore, she argues that Penn's marketing spend of $150 million on ESPN may not necessarily translate into significant market share gains.
Overall, Farley maintains a buy rating on DraftKings shares, which have already seen a nearly 3% increase during Monday's session.
