In a major shift of position, J.P. Morgan analyst Joseph Greff went all in on DraftKings, raising his price target from $26 per share to $37 and moving his rating from “Neutral” to “Overweight.”
The reasons for Greff’s pivot included an overall “appealing sector” (online sports betting), “attractive same-store and new market growth prospects,” and better control of expenses across the sports-betting marketplace. The latter was attributed to less and less revenue coming from newer markets, “which have meaningful new-user acquisition costs and up-front investment.”
Greff continued that DraftKings has “a strong moat” in terms of its product, size, and brand recognition. He suggested that those assets should enable it to compete against newcomers Fanatics and ESPNBet, as it has against heavyweight Caesars Sportsbook.
The analyst predicted that DraftKings by 2026 would have year-end cash flow of $1.2 billion and cash on hand of $3 billion. “We believe current fundamentals are reasonably strong … and look at DKNG’s November investor event as a positive catalyst for what should be an attractive and improving EBITDA profit path,” Greff wrote.
In the closer term, Greff projects revenue of $4.3 billion and cash flow of $310 million next year, a slight increase from earlier predictions. For 2025, he forecasts $5.1 billion of revenue and cash flow of $824 million.
Why? DraftKings “stands to benefit from a continued increase in market share from higher hold rates (driven by parlay mix and better risk/trading) and improved loyalty (from brand recognition, trust, and product enhancements).” Furthermore, marketing (“customer acquisition”) will decrease in cost as DraftKings achieves nationwide presence, perhaps “precipitously.”
Using existing states and Ontario as a guide, Greff predicts a sports-betting market of $23.2 billion by 2030, with the compound annual growth rate set at a “modest” eight percent. New states are forecast to chip in $6 billion in revenue by 2030. Greff’s model also assumes that the average American bets $125 per year, versus last year’s $65 per adult.
As for igaming, of which DraftKings enjoys considerable market share, Greff predicts a $13.5 billion market by the next decade, assuming new state-level legalizations. Those are forecast to contribute $2 billion in 2030. In this case, Greff’s assumptions are that only a quarter of the American populace has igaming access and that the average player spends $211 per year.
Looking to the next two years, Greff projects internet casinos bringing in $7.2 billion, then $8.3 billion. This 16 percent growth rate is predicated entirely on existing state revenues, with no new states baked into the model.
