Online gaming is hot.
Ever since there was the first approval following the Supreme Court's decision to strike down the Professional and Amateur Sports Protection Act (PASPA), which was a federal anti-gambling law from 1992, we have seen enormous growth in online gaming sites. It also helps that most people have smart phones, which allow for easy betting and access.
Currently 34 states allow some form of sports betting, which is two-thirds of the entire country and more states are expected to approve the action in the years to come. The more states that allow sports gaming, the better the position for DraftKings ( DKNG) and other online gaming sites. In 2022, a record 93.2 billion was legally "handled" in the U.S., a 61% growth rate over 2021. With a strong economy going forward that number may only increase. More than 81 million North Americans now play legal sports betting and fantasy sports, according to the Fantasy Sports and Gaming Association.
DraftKings is the only true pure-play public company for online sports betting. The company has been extremely aggressive in attaining market share. In prior filings DKNG has reported very high traffic acquisition costs, which are dollars spent to affiliates and online companies to direct traffic to their website. This is a necessary evil for most startups and eats into margins, but DraftKings recently said its traffic acquisition costs were drastically lower now. It seems the brand is strong enough to stand on its own, reducing the need for the expense. That's a positive sign.
Recent news of a long term tie-up between Disney ( DIS) and Penn Gaming ( PENN) gives credibility to the industry and another strong player to enter the field. With the recent start of football season and more opportunity for growth in this business, DraftKings is in the sweet spot. I suspect the stock could rise another 20%-30% by the end of 2023, from $32 a share (current price) to about $40.
Looking at the technicals of DraftKings, the weekly chart is looking strong for a continuation move. The candles on the goNOgo system in the top pane show a bullish condition with blue or teal colors. This system is a composite of several indicators and when they are blue it is a strong "Buy" indication. The TDI (traders dynamic index) compares relative strength to bollinger bands, this is also on a buy signal crossover. Money flow has fallen a bit but remains on a buy signal for now.
