- DraftKings contemplating number of prediction market avenues, information might quickly emerge, says Jefferies analyst
- State regulators loom massive in that equation
With DraftKings (NASDAQ: DKNG) inventory down 16% over the previous week and September maintain prone to disappoint amid a spate of NFL outcomes that benefited bettors, traders are understandably pensive about what’s subsequent for the battered gaming fairness.
DraftKings has quite a lot of prediction markets choices, says a Jefferies analyst. (Picture: Shutterstock)
Concerning the rising aggressive menace from Kalshi and different prediction markets, there’s a way amongst sell-side analysts that these fears are overblown as they relate to sports activities betting shares, however traders are in search of responses from the likes of DraftKings, notably as Kalshi high quality tunes its soccer parlay menu.
What DKNG is doing to organize for entry into prediction markets; our impression is {that a} vary of methods are into account that would manifest within the fast time period ought to regulatory our bodies on the state stage allow,” observes Jefferies analyst David Katz.
In a brand new report, he reiterated a “purchase” score on DraftKings whereas slicing his worth goal to $51 from $54 and eradicating the inventory from Jefferies’ Franchise Picks listing. The revised worth goal implies upside of 44% from the inventory closed on Friday, Oct. 3.
Prediction Markets Carry Threat for DraftKings
Whereas there’s no scarcity of rumors, together with these of the acquisition selection, DraftKings’ prediction market entry isn’t as cut-and-dry as merely shopping for an occasion contracts enterprise or organically rising its personal associated entity.
In contrast to Kalshi, Polymarket, and others, DraftKings and rival on-line sportsbooks are regulated on the state stage and a few states are already warning gaming firms about entering into the prediction markets house. The Arizona Division of Gaming (ADG), Michigan Gaming Management Board (MGCB), and the Ohio On line casino Management Fee (OCCC) are among the many state regulators which have warned gaming firms that in the event that they pursue prediction markets entries, their sports activities betting licenses might be jeopardized.
Regardless of all of the commotion and stock-level shocks induced by stories of prediction markets quantity, some sell-side information point out occasion contract soccer quantity received’t be anyplace near regulated sportsbook deal with this season, indicating the prediction market juice may not be well worth the squeeze for DraftKings and a few of its rivals.
Prediction Markets Have DraftKings in Robust Spot
Some market observers imagine the rise of prediction markets has on-line sportsbook operators, DraftKings particularly, between a rock and a tough place. Bearish views on the inventory focus on prediction markets progress and DraftKings not with the ability to reply because of the aforementioned state-level regulatory dangers.
Conversely, DraftKings’ restraint on the occasion contracts might pay long-term dividends by guaranteeing compliance in classic states whereas not working afoul of laws in coveted jurisdictions the place sports activities betting isn’t but authorized, specifically California.
Add all of it about and the perfect elixirs for the inventory’s latest woes could be a reversal of bettors’ NFL luck and DraftKings leveraging its buyback program to purchase shares at what at the moment are favorable costs.
