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Sportsbooks operators such as DraftKings Inc (NASDAQ:DKNG) could stand to benefit with the 2024 National Football season underway and another week of favorable outcomes for sportsbooks in the second week of games.
The DraftKings Analyst: Needham analyst Bernie McTernan reiterated a Buy rating and $60 price target on DraftKings after the second week of the NFL season.
The Analyst Takeaways: Sportsbooks likely had favorable outcomes from the NFL matchups for a second straight week, McTernan said in a new investor note.
The analyst previously estimated the first week of the NFL would show favorable outcomes for sportsbooks thanks to several of the top bet-on teams either lost or failed to cover the spread. Data from New York sportsbooks showed this may not have been the case with sportsbooks in the state having a 6.8% hold rate, compared to 13.6% for the first week of the NFL season last year.
There were only four weeks in the 2023 NFL season of 18 total that had a hold rate below 6.8%, the analyst added.
"We think week two was a bounce back week for the sportsbooks, following week one that was worse than we estimated," McTernan said. "We think week two was a good week for the sportsbooks as three of the four largest underdogs won outright in the Sunday 1 p.m. and 4 p.m. ET slate."
The analyst said the underdogs won in over 50% of the games and covered the spread in 64% of games, which is usually a favorable outcome for sportsbooks.
Among the NFL teams to lose in the second week and most bet-on teams to cover on Sunday were the Baltimore Ravens (to the Las Vegas Raiders), Dallas Cowboys (to the New Orleans Saints) and San Francisco 49ers (to the Minnesota Vikings).
App store rankings showed DraftKings as the third top sports app for the second week of the NFL season, up from fifth place last week. FanDuel, owned by Flutter Entertainment (NYSE:FLUT) ranked fifth on the week, up from seventh place last week.
Several other sportsbooks saw their rankings on the iOS app store rankings improve including bet365 and BetMGM. ESPN Bet, operated by PENN Entertainment Inc (NASDAQ:PENN) fell in the rankings going from 23rd in the first week of the NFL season to 26th place in the second week. Fanatics sportsbook also fell from 25th to 31st from the first to second week of the NFL season.
McTernan cautioned that DraftKings ranking first in the iOS app store rankings to start the 2024 season might not last.
"As a reminder, DKNG also was the leader the first two weeks of last season but FanDuel narrowly edged them for the lead for the whole season."
The second week NFL results along with the growing sportsbook market had the analyst remaining bullish on DraftKings.
"We see DKNG as a leader in the emerging North America online gambling market, a $35B market opportunity."
DKNG Price Action: DraftKings stock is up 1.30% to $38.29 on Monday at publication versus a 52-week trading range of $25.74 to $49.57. DraftKings stock is up 13% year-to-date in 2024.
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