DraftKings Stock Price Receives BUY Rating as Sports Betting Market Grows Strong
Morningstar has maintained a BUY rating on DraftKings Inc. (NASDAQ: DKNG), citing robust growth in sports betting, improved cost efficiency, and expansion in key markets. The stock closed at $46.45 on February 13, 2025, and is trading at a 9% discount to its fair value estimate of $51.00.
Despite regulatory challenges and heightened competition, DraftKings continues to expand market share while improving operational efficiency. With a forecasted 2025 revenue of $6.45 billion, the company remains a dominant force in the U.S. online sports betting and iGaming market.
This report examines DraftKings’ financial health, key growth catalysts, technical outlook, and competitor analysis to help investors make informed decisions.
Stock Performance and Analyst Ratings
| Metric | Value |
|---|---|
| Last Close (Feb 13, 2025) | $46.45 |
| Fair Value Estimate | $51.00 |
| Price/Fair Value Ratio | 0.91 (Undervalued) |
| Market Capitalization | $25.17 billion |
| P/E Ratio | N/A (Currently Unprofitable) |
| 52-Week High/Low | $49.57 / $28.69 |
| Morningstar Economic Moat | Narrow |
| Uncertainty Rating | Very High |
Morningstar believes DraftKings remains undervalued, offering potential upside of 9% based on fair value calculations.
Key Growth Drivers for DraftKings
1. Revenue Growth and Market Expansion
DraftKings has increased its 2025 revenue guidance to $6.45 billion, driven by higher sports betting engagement, expansion into new states, and improved customer retention strategies.
Super Bowl betting hit a record $436 million, with a 40% rise in parlay betting activity.
Structural hold rate improved to 11.2% in Q4 2024, enhancing long-term profitability.
Addition of 3.5 million new users in 2024, bringing the total to 10.1 million active users.
2. Sports Betting & iGaming Market Leadership
DraftKings continues to dominate the North American sports betting market, maintaining 30%+ revenue share in key states.
Expansion into Missouri (legalized in 2024, expected to launch in 2025).
Potential new markets: Texas, California, and Georgia (under discussion for legalization).
Leading technology and data analytics capabilities, enhancing user experience and increasing betting volumes.
3. Improved Cost Efficiency & Profitability Outlook
DraftKings has successfully reduced promotional spending, improving operating margins.
Marketing expenses as a percentage of revenue projected to drop from 33% (2023) to 12% by 2033.
EBITDA margins expected to expand from -4% in 2023 to 28% by 2033.
Strong liquidity position: Net cash of $400 million and untapped $125 million credit facility.
Technical Analysis: Bullish Outlook for DraftKings?
1. Moving Averages & Trend Analysis
50-Day Moving Average: $44.20 (stock trading above, bullish signal)
200-Day Moving Average: $41.50 (long-term uptrend intact)
RSI (Relative Strength Index): 55.8 (neutral, room for further gains)
DraftKings is trading above key moving averages, signaling a bullish trend continuation.
2. Fibonacci Retracement Levels
Using 52-week high ($49.57) and low ($28.69) as reference points:
| Retracement Level | Price Target ($) |
|---|---|
| 23.6% | $39.89 |
| 38.2% | $42.81 |
| 50.0% | $45.01 |
| 61.8% | $47.22 |
| 78.6% | $49.02 |
Competitive Landscape: DraftKings vs. Industry Peers
DraftKings competes with major players in the online gaming and sports betting industry, including MGM Resorts (NYSE: MGM), Caesars Entertainment (NASDAQ: CZR), and Penn Entertainment (NASDAQ: PENN).
| Company | Market Cap ($B) | Fair Value Estimate | Last Close | P/E Ratio |
|---|---|---|---|---|
| DraftKings (DKNG) | $25.17B | $51.00 | $46.45 | N/A |
| MGM Resorts (MGM) | $12.02B | $51.00 | $40.37 | 15.59 |
| Caesars (CZR) | $8.26B | $66.00 | $38.87 | N/A |
| Penn Entertainment (PENN) | $3.43B | $22.00 | $22.44 | N/A |
Final Verdict: A High-Risk, High-Reward Play
For growth investors, DraftKings remains an attractive long-term bet, especially given its undervalued stock price and market leadership in sports betting.
Investor Disclaimer:
This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.
