6 Gambling Stocks Ready For a Rebound - 1 of 6

#1 - DraftKings (NASDAQ:DKNG)

Fresh off its initial public offering (IPO), DraftKings (NASDAQ:DKNG) could not have had worse news than the Covid-19 pandemic. DraftKings is the United States leader in Fantasy Sports; the company has a 60% market share. This means that DraftKings relies heavily on the live sports industry. And with all major college and professional sports postponed due to the novel coronavirus, DraftKings revenue stream is limited.

It now appears that live sports will be returning in some fashion. And when they do, that will be a catalyst for DKNG stock. In the meantime, the company continues to offer to bet on things consumers can bet on, such as esports.

Analysts were encouraged by the company’s first-quarter results. The company’s revenue increased 30% to $89 million. Before the Covid-19 pandemic, DraftKings was showing a year-over-year gain of 60%. The company has approximately $450 million in cash. While major sports are on hold, the company has a cash burn of approximately $15 to $20 million a month.

DKNG stock is not without risk. Morgan Stanley (NSYE:MS) analyst Thomas Allen says that DraftKings will not be profitable until 2023. At that time, he projects the company will reach $1.4 billion in sales. And that means DraftKings is valued for its future potential, not for its current revenue. Currently, the stock is priced at about $9.9 billion. That’s about 14 times next year’s projected revenue of $700 million.

About DraftKings

Current Price

$35.69

Consensus Rating

Moderate Buy

Ratings Breakdown

24 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.

Consensus Price Target

$50.22 (40.7% Upside)