The Tailwinds Are Too Powerful To Ignore for DraftKings

For some gamblers, it’s not enough to bet on who will win or lose a game. Micro-betting is shaping up to be a major tailwind for sports betting equities like DraftKings (NASDAQ:DKNG) stock.

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DraftKings is one of the best-known and most successful sports betting names on the market today. The stock is enjoying a strong ride, up more than 25% so far this year.

As more states legalize sports betting and online wagering, DKNG stock will continue to expand its footprint and customer base.

Here’s a closer look at the trends that are making DraftKings a sure winner for investors.

DKNG Stock at a Glance

It may seem like DraftKings has been around forever, but the stock has only been traded for a year. DraftKings went public in April after a blank-check merger with Diamond Eagle Acquisitions, a special purpose acquisition company (SPAC).

Looking back, it was an awful time to take a company public. The novel coronavirus pandemic shut down the postseason college basketball tournament, the NHL and the NBA. Major League Baseball postponed the beginning of its season. People were quarantined and locked at home as the economy, and the sports world, ground to a halt.

DraftKings stock started out with a listing price of $17. That looks like a bargain now, with DKNG stock now over $58. It’s generated returns of more than 350% in a year.

For the most-recent quarter, DraftKings posted fourth-quarter earnings that beat analysts expectations in growth in paying customers and in revenue.

The company announced it brought in $322 million in revenue in Q4, which beat analysts’ expectations. The company said quarterly revenue was up 98% from the previous year.

Losses came in a 24 cents per share, which was a significant improvement from the 47 cents per share that analysts expected.

DraftKings also announced it had 1.5 million monthly unique payment customers in the fourth quarter, beating analysts’ estimates of 1.43 million. That’s a 44% increase on a quarter-over-quarter basis, as DKNG reached the 1 million mark just in the previous quarter.

DraftKings says the average revenue per monthly user is $65.

The rapid growth prompted DraftKings to raise its revenue projections for 2021. The company is now guiding for annual revenue this year of $900 million to $1 billion, an increase from its previous projection of $750 million to $850 million.

The Market Continues to Expand

At the end of the fourth quarter, DraftKings was offering mobile sports betting in 12 states, representing just 25% of the nation.

But that number is expected to grow quickly. At least 19 states are considering legislation to allow online sports betting and six others are looking to expand their current offerings.

The most recent state to clear the way for online gaming is Connecticut Governor Ned Lamont came to an agreement with the Mashantucket Pequot and Mohegan tribes that will allow sports wagering and online gaming in the state.

The tribes operate two of the most successful casinos on the east coast. And of course, DraftKings closed deals with both in the fourth quarter.

Micro-Betting Is the Hot Trend

Online wagering is important for DraftKings because it means you don’t have to be at a casino to place a bet. It opens the doors to more customers – and when you’re bringing in $65 for each monthly unique user, you want as many customers as you can get.

Another way to increase the user base is micro-betting, which is live, in-game wagering. You can bet on anything, like who will make the next score, or whether the quarterback will call a run or a pass. With micro-betting, you can wager on who will win an individual round of boxing or MMA fighting. You can wager whether the next pitch in an MLB game will be a ball or a strike.

JPMorgan analyst Daniel Politzer says that micro-betting will become a large part of the sports betting landscape in the U.S. He says the “accommodating cadence” of sports, which has numerous stoppages of play in football, baseball and basketball, opens the door for in-game micro-bets.

The Bottom Line

DraftKings stock is discounted pretty heavily right now. Despite attention brought by the March Madness college basketball tournaments, DKNG stock is down roughly 19% in the last week.

But the growth opportunities for sports wagering and DraftKings’ position in the space are too powerful to ignore. States are falling over each other to be next in line to offer sports wagering.

Don’t be surprised if DraftKings blows through its 2021 revenue projections. It’s a winning bet.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.

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