Listen up, investors. Are you willing to spin the wheel and bet on a stock pick with excellent rebound potential? DraftKings (NASDAQ:DKNG) stock is zooming higher today despite the lack of company-specific news, but there’s actually a lot going on with DraftKings in 2024. Consequently, I am bullish on DKNG stock this year and consider it appropriate for a small share position.
DraftKings offers sports betting and other forms of online gambling. The company is in expansion mode, having recently acquired Jackpocket, a digital lottery app.
Now, I know what you might be thinking: gambling, digital or otherwise, isn’t fully legal in all U.S. states right now. That may be the case, but the times are changing, and so are the laws in some states. Therefore, don’t rule out DraftKings stock until you’ve weighed all of the relevant facts and circumstances, some of which bode well for DraftKings stock.
DraftKings Stock Continues on Its Comeback Path
As I alluded to earlier, DKNG stock is up today, moving 8% higher, even though there wasn’t any company-specific catalyst. Overall, it’s looking more and more likely that the stock will revisit its 2021 peak of more than $70.
That’s an ambitious target, but a big comeback is possible since DraftKings is a fast-growing business. Check TipRanks’ financials page for DraftKings, and you’ll see what I’m talking about. The company’s revenue has grown over the past year, while DraftKings’ total debt has remained steady.
If you’re still in doubt, just take a look at DraftKings’ Fiscal Q1-2024 top-line performance. Believe it or not, the company managed to increase its revenue by 53% year-over-year to $1.175 billion. Moreover, the analysts’ consensus estimate called for $1.12 billion in revenue, so that’s a beat for DraftKings.
The company attributed this amazing result to “healthy customer engagement” and “efficient acquisition of new customers,” among other factors. It sure sounds like people are willing to gamble their money in 2024, even despite persistent inflation.
In addition, DraftKings hiked its revenue guidance range for Fiscal Year 2024. The previous guidance range was $4.65 billion to $4.9 billion, but now DraftKings anticipates $4.8 billion to $5 billion in full-year revenue, which would represent impressive 31% to 36% year-over-year growth.
DraftKings: Growing Pains and Taxation
DraftKings is growing, and so is the American legalized gambling market. That’s exciting for investors, but be ready for growing pains because U.S. states will want to take a big piece of the financial pie.
It’s just part of the legalization process, so don’t let high gambling taxes scare you too much. Bear in mind that DraftKings has a daily fantasy sports product that’s available in 44 states, sports-betting operations that are pursuant to regulations in 27 states, and iGaming operations in five states.
Plus, DraftKings has various operations in Canada and the United Kingdom. The point here is that DraftKings is geographically diversified, so high tax rates in one state aren’t likely to ruin the company.
Nevertheless, some people will worry about DraftKings’ future prospects. In particular, DraftKings stock tumbled when Illinois state senators approved a budget for 2025. This budget would raise the effective tax rate for sports-betting businesses operating in Illinois from 15% currently to as high as 40%.
The primary concern here is what I would call “taxation contagion.” For example, New Jersey legislators are considering doubling the state’s tax rate to 30% for online sports gambling businesses.
DraftKings CEO Jason D. Robins doesn’t seem to be losing too much sleep over the taxation issue, though. He’s probably not a fan of big tax hikes for gambling operations, of course. Still, Robins said, “My expectation is that we’ll be able to convince them that it’s not a good policy decision” to over-tax gambling businesses.
I suspect that Robins is 100% right about that. U.S. states that approve of legalized gambling don’t want to lose revenue-generation opportunities. If they raise the taxes too high, gambling businesses like DraftKings will move their operations elsewhere.
Is DraftKings Stock a Buy, According to Analysts?
On TipRanks, DKNG comes in as a Strong Buy based on 25 Buys and two Hold ratings assigned by analysts in the past three months. The average DraftKings stock price target is $53.29, implying 26.5% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell DKNG stock, the most profitable analyst covering the stock (on a one-year timeframe) is Jordan Bender of JMP Securities, with an average return of 64.55% per rating and an 82% success rate. Click on the image below to learn more.
Conclusion: Should You Consider DraftKings Stock?
Without a doubt, taxation will be a financial burden for DraftKings. It’s just part of the growth process for the burgeoning American legalized gambling industry, though.
Besides, DraftKings expects Fiscal Year 2024 to be a big success in terms of revenue generation, and the company’s CEO doesn’t seem to be overcome with anxiety. Hence, I’m feeling bullish on DKNG stock and would consider putting a few chips on this intriguing investment opportunity.
