With the start of the new football season, gambling stocks are becoming interesting again for investors looking to get in on the game. One stock in particular has caught the attention of a Wall Street analyst who says this online gambling company could be a big hit.

Chad Beynon, senior gaming analyst at Macquarie Capital, believes DraftKings is the best online gambling stock to own as the National Football League regular season prepares to begin on September 5.

Boston-based DraftKings traded at around $35.33 per share at the close on Tuesday. Beynon and the Macquarie team set a price target of $50 per share on the stock.

“We see DKNG in the best position for near-term upside due to favorable NFL game results, greater structural stability and overall growth momentum in the online sports betting/iGaming space,” Beynon wrote in an Aug. 26 research note.

According to Macquarie’s research, North American online sports betting stocks are up an average of 18 percent year-to-date. But DraftKings is lagging the market in 2024, and that’s where the opportunity for the stock comes in, the analysis says.

“Given current hold/growth trends (in the third quarter), an easier year-over-year hold comparison (in the fourth quarter), and the recently revised 2024 guidance (link), we believe DKNG is well positioned to beat expectations (in the second half of the year),” Beynon said.

DraftKings still sees FanDuel positively

After years of not generating an operating profit, DraftKings reported its first profitable quarter as a publicly traded company in the second quarter of this year.

The company almost lost its market momentum when it announced that it would introduce a customer surcharge on winning bets starting in 2025 to offset operating costs in high-tax states like New York and Illinois. A near-unanimous rejection of the proposal and the lack of other competitors led DraftKings to abandon the idea altogether.

DraftKings and its main competitor, New York-based FanDuel, control the majority of the domestic online gambling market. According to publicly available data, the two companies account for about 70 percent of online sports betting revenue (total wagered) in the United States and more than 60 percent of reported internet gambling revenue.

Based on recent valuations, DraftKings has a market cap of $17 billion. FanDuel’s parent company Flutter Entertainment plc recently went public in the US and has a market cap of $22.8 billion.

Neither DraftKings nor FanDuel offer online gambling products in Nevada. The state’s in-person registration requirement virtually precludes the two digital operators from having an actual presence in the Silver State. Boyd Gaming’s Fremont casino-hotel in downtown Las Vegas features a FanDuel-branded sportsbook, managed by the local gaming operator.

DraftKings employs nearly 1,000 people at its Southern Nevada office in the mixed-use Uncommons complex in the Southwest Valley. The Las Vegas office primarily handles customer service calls, with a handful of dealers (oddsmakers) and a legal department also on-site.

Stocks with ties to Las Vegas casinos

MGM Resorts International is the only gaming stock with a physical presence in Las Vegas and a market capitalization of over $10 billion. MGM – which operates an online gaming product through a 50/50 partnership with Entain plc – has a listed market capitalization of $11.8 billion.

At the close of trading on Tuesday, MGM Resorts shares were trading at $38. Macquarie gave MGM a price target of $55.

Macquarie’s Aug. 26 research note questions whether MGM’s recent move to offer a single digital wallet in all states where the BetMGM product is available will provide a “significant boost.”

The only other notable Las Vegas-related stock Macquarie expects to “outperform” in 2024 is Caesars Entertainment. The Reno-based casino operator has a market cap of $7.9 billion. Macquarie set a price target of $52 per share on Caesars Entertainment stock, which closed at $37.80 per share on Tuesday.

David Danzis can be contacted at [email protected]. Follow AC_Danzis on X.