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DraftKings: Bet on the Best in Class

11/24/2020 5:00 am EST

Focus: TECHNOLOGY

Jon Markman

Editor, Tech Trend Trader, The Power Elite, & Strategic Advantage

DraftKings (DKNG) is an important digital transformation story that spans horse-racing, football, boxing, baseball and more. Longer-term investors should be buying the stock here, suggests Jon Markman, technology sector expert and editor of Strategic Advantage.

The Boston, Mass.-based firm is the product of a three-way merger in April with Diamond Eagle Acquisition Corp, and U.K-based SB Tech, a sports betting technology company. The combination mixes strengths in online fantasy sports, finance and best-in-class digital wagering technology.

It’s also the only vertically integrated public sports betting company in the United States. That’s important because legalized sports betting is sweeping through United States.

Since a New Jersey supreme court ruling in 2018, 21 states have legalized online sports wagering according to an ESPN report, and an additional 26 states are on track to do the same. At this point, only Idaho, Wisconsin and Utah are outside looking in. The appeal for states is fees.

The United States is a hotbed of professional and college sports and SB Tech’s bet engine, risk management tools and algorithms are robust enough to accommodate a barrage of non-standard, in-game bets.

For example, patrons will be able to wager on live, play-by-play outcomes. That’s so much more than betting winners, losers and the over/under for points scored. It’s a big opportunity to attract new bettors and grow sales. New Jersey was the first state to move aggressively toward iGaming.

DraftKings recently reported third quarter financial results. Sales grew to $133 million, an increase of 98% compared to a year ago. Bettors, or what the company calls monthly unique players surged 64% to more than 1 million. And the company raised the midpoint of its 2020 guidance from $520 million to $550 million.

DraftKings isn’t an investment story about the pandemic or even the health of professional sports leagues. It’s a digital transformation story. The company is building the biggest and best platform to collect and monetize sports betting and iGaming transactions.

As states clamor to replenish their coffers ravaged by the pandemic, more are likely to allow online transactions. DraftKings will gobble up share quickly. Profits will follow.

Based on the addressable market shares could trade to $75 during the next 12 months. Add DKNG to your Digital Transformation portfolio and be patient. It’s not just a roll of the dice, it’s a big change in society’s emotional interaction with sports and gambling.

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