DraftKings Lauded by Previously Bearish Research Firm
DraftKings’ (NASDAQ: DKNG) stock was endorsed today past Hedgeye — a research unwavering that was antecedently overtly bearish on the gaming company’s shares.
In a short letter to clients on Thursday, Hedgeye analysts Sweeney Todd Jordan River and Sean Jenkins highlight favourable basics for DraftKings, including rising same-state revenue and a more restrained promotional spending environment.
Same res publica revenues are re-accelerating and the young province outlook is as lustrous as ever,” noted the analysts. “The promotional and extraneous marketing environs looks a minuscule less strong-growing than finally twelvemonth with Caesars scaling backrest and Wynn Resorts essentially pulling out. DKNG over indexes to football so the timing is compensate for farther sequential market place deal gains.”
Hedgeye added DraftKings stock as a young best thought long, but the shares slipped 3.46% on below-average intensity Thursday as move and leisure stocks of all stripes, including gaming names, slid amid fears the federal official Reserve will go on its strong-growing rate-hiking posture through and through year-end and into 2023.
Hedgeye Reverses Course on DraftKings
As noted above, DraftKings shut lower Thursday, and patch 29 analysts overcompensate the stock, Hedgeye’s unused outlook on the call is notable.
In Jan 2021, the research firm issued a vituperative cover on the gaming company, highlighting the carry as a valid unforesightful idea on the groundwork of an “obscene” valuation, a long road to profitability, and eroding market place share.
Plenty of traders took that advice, as DraftKings has been a favourite mark of myopic sellers inward its brief clip as a freestanding public company. Kynikos Associates founder Jim Chanos — ane of Wall Street’s to the highest degree respected short sellers — is unawares DraftKings and antecedently lambasted the company’s money-losing business concern model.
Short interest group inward the sportsbook operator’s shares hovers around 10%, according to Seeking Alpha data.
Why Hedgeye DraftKings View Could follow Validated
There’s no getting around the fact that to the highest degree gaming stocks are faltering this year, and DraftKings is a notable culprit with a 2022 slump of 42.19%. But, Hedgeye’s bullish scene on the shares has merit.
Through the number one terzetto weeks of the NFL season, sportsbook operators’ give — what’s maintained after paying out winning bets — has been mostly solid. Additionally, the calendar is favourable for the manufacture as in that respect are 14 weeks remaining inward the NFL season, and the NBA fixture time of year commences on October 18. Football and hoops are the 2 most wagered on sports inwards the US.
Integral to any bullish thesis on DraftKings — and any other sportsbook operator’s shares for that matter — is the egress of promotional spending. Broadly speaking, there’s grounds that gaming companies are displaying restraint on this front, but the tertiary hebdomad of the NFL harden also brought some examples of operators, including FanDuel and Benjamin Rush Street Interactive (NYSE: RSI), boosting promotional expenditures in a play to enticement more young clients.
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