Bullish Morgan Stanley Memo Boosts DraftKings Stock

• Investment firm Morgan Stanley released a memo on DraftKings’ stock on Wednesday, upgrading its standing from “equal weight” to “overweight”.
• DraftKings is set to see another substantial bump in stock price in 2022, with New York’s mobile sportsbook launch providing a huge boost to DraftKings’ revenue figures, among other factors.

BOSTON - After a rough month for several major sports-betting related stocks, perhaps the most well-known of them is showing very encouraging signs of a bounceback - as a result, now may be the perfect time for sports bettors to invest in their favorite sportsbook operator.

Tumbling DraftKings Gets Boost From Morgan Stanley

One of the most popular sports betting operators in the United States is DraftKings - despite this, DraftKings’ shareholders suffered in January. On December 27, DraftKings was priced at $28.31 a share - by January 24, the stock had fallen to $17.64 a share. That fall does not paint the whole picture of DraftKings’ year, however; DraftKings hit its all-time peak on March 15, 2021, when it reached a price of $71.98 a share. This means that in the span of less than a year, the stock lost nearly two-thirds of its value.

The news is not all bad for DraftKings, though. On Wednesday, financial giant Morgan Stanley released a rather bullish public memo on DraftKings titled “Too Big an Opportunity to Ignore.” Penned by analyst Thomas Allen, the memo discussed the company’s prospects and upgraded the stock’s rating from “equal weight” to “overweight,” signaling an increase in perception of the stock from Morgan Stanley’s analysts. Allen maintains a $31 target price for the stock.

“While we and the market have been focused on near-to medium-term profit concerns, we believe at the current price one should not ignore that DKNG is a leading market share player in what will be a very large profitable market,” Allen said in the note.

DKNG Rallies In Wake Of Memo

Investors took note of Allen’s memo: on Tuesday, the stock closed at $19.31 a share; by noon on Wednesday, it had jumped to $22.66 per share. While it was unable to maintain that mark, DKNG closed at a strong $20.34.

The stock is ready to increase in value again shortly: on February 18, DraftKings will release its 2021 Q4 earnings report. The final three months of 2021 were historically strong in several states in which DraftKings has a presence - as a result, the earnings report may look quite encouraging to investors (who generally do not expect the company to turn a profit until 2024, primarily as a result of promotional spending and customer acquisition costs).

If all went as projected by industry experts for DraftKings in Q4, it should see a healthy price spike as a result of the earnings report release. This makes Wednesday’s spike important for investors - if the stock can maintain its momentum into the earnings report release in mid-February, it could mean a potentially significant increase in DraftKings’ share price from its current position if the stock sees another spike with the release of the earnings report. Moreover, if it maintains its momentum, the stock’s price may be at its short-term low point, making now a potentially opportune time for an investor’s entry into the stock.

New York Mobile Launch May Boost DraftKings’ Stock

DraftKings’ shareholders have other things to be excited about besides the upcoming Q4 earnings report, as well. New York’s recent mobile sportsbook launch should boost DraftKings’ standing strongly in the online gambling industry - according to the New York State Gaming Commission, DraftKings brought in over $134 million in online sports betting handle in just over a week after launch.

"We increase our 2025 forecasts from $19B to $21B to reflect the strength we saw in NY in the first 8 days, much stronger than expected results released by MI, CT, and TN last week, and implications for future states," Morgan Stanley said.

There are plenty of other factors that contributed to Morgan Stanley’s upgrade of the stock. The firm believes that California is likely to legalize and regulate sports betting in 2022, which would create another enormous market in which DraftKings would likely have access to. DraftKings was also an early entrant into most markets that it is currently present in, largely as a result of the company’s Daily Fantasy Sports offerings that were considered a legal gray-area in many jurisdictions prior to the overturning of PASPA and in states that have not yet regulated sports betting. DraftKings’ early entry has built them a strong level of awareness in the industry, coupled with a loyal customer base. This makes DraftKings somewhat insulated from large long-term slumps, which bodes well for investors’ confidence.

Is Now The Time To Invest In DKNG?

With a wide variety of markers pointing towards a strong 2022 for DraftKings, sports bettors and investors alike may be served well by investing in the sportsbook operator now, before the share price increases further. The company is also beginning to branch out into other industries - in July, the company launched its first NFT product in collaboration with the Tom Brady-founded Autograph. The company also was one of the names thrown around as a potential suitor for the publication The Athletic when it was up for sale. If 2022 is the year in which DraftKings establishes a presence across industries, the potential is nearly uncapped for investors.