DraftKings, a prominent sports betting operator, is looking strong ahead of the 2024 NFL season, according to Needham analyst Bernie McTernan. McTernan reiterated a Buy rating and a $60 price target for DraftKings, highlighting its competitive advantages in several key areas.
The start of the NFL season is crucial for sports betting companies, and McTernan analyzed promotional activity, app rankings, market share, and other metrics to assess DraftKings’ performance against its rivals, including market leader FanDuel (a unit of Flutter Entertainment) and other sports betting operators.
McTernan noted that the promotional environment is more aggressive this year compared to last year, which is significant given the key investor focus on 2025 estimates, particularly revenue growth and incremental margins. DraftKings is currently offering new customers $250 in free bets along with one month of NFL+ Premium. This is comparable to FanDuel’s offer of $250 in free bets and a three-week free trial of NFL Sunday Ticket. Notably, the $250 offer is an increase from the $200 offered by both companies last year. Fanatics, another competitor, has the most generous offer to start the season with $1,000 in matching free bets over a 10-day period.
In terms of app rankings, FanDuel surpassed DraftKings during the last NFL season, while the ESPN Bet app from Penn Entertainment took the top spot after its launch in November. Ahead of the 2024 NFL season, FanDuel holds the lead, followed by Fanatics and BetMGM. ESPN, owned by Walt Disney, leads in sports media and fantasy sports apps heading into the season, potentially benefiting Penn Entertainment, which licenses the ESPN brand for its ESPN Bet sportsbook.
McTernan also highlighted updates for ESPN Bet ahead of the season, including more parlays, trending bets, exclusives, early payouts, and further integration with ESPN apps and sportscasts. He commented, “Overall, these product updates highlight PENN is executing on its plan for what they can control.”
An analysis of market share comparisons shows DraftKings and FanDuel with a clear lead, effectively forming a duopoly. FanDuel led with 37.8% market share in 2023 compared to 34.8% for DraftKings. FanDuel also led in the first and second quarters with 38.7% and 37.3%, respectively, compared to 34.4% and 37.0% for DraftKings. DraftKings closed the gap on FanDuel in the second quarter, and the third quarter could be pivotal for both operators as NFL and NCAA Football return in full force. ESPN Bet had a 3.2% market share in 2024 and a market share of 4.6% and 3.1% in the first two quarters. Despite ESPN’s large audience, Penn Entertainment’s product continues to see minimal market share.
BetMGM, a joint venture of Entain and MGM Resorts International, ranked third with an 8.6% market share in 2023 and a 7.9% market share in both the first and second quarters. While BetMGM holds the third spot, its market share has declined from 12.1% in 2022 as DraftKings and FanDuel gain market share against the competition.
Despite the emergence of numerous competitors challenging DraftKings and FanDuel, these two leaders have managed to maintain their position and grow. McTernan stated, “Within this market, we believe DKNG has a sustainable customer acquisition strategy that should continue to drive its first- or second-place position in all states.”
Currently, DraftKings stock is trading at $34.51, within a 52-week range of $25.74 to $49.57. DraftKings stock is up 2.7% year-to-date in 2024.
