Options Buyers Are Lukewarm on DraftKings Despite Multiple, Positive Signs

Institutional investors and a growing number of sell-side analysts are turning positive on DraftKings (DKNG), which owns and operates a popular sports betting platform. Moreover, data shows that the popularity of online sports betting is continuing to grow rapidly in the U.S.

The DKNG stock price currently sits less than 3% its 12-month high, gaining almost 17% in the last month alone. But that optimism is not reflected in the sentiment of options buyers, data compiled by Fintel reveals.

Sports betting has exploded in the U.S. The American Gaming Association reported that $31.11 billion was legally bet on athletic competition in the first quarter of this year, yielding a record $2.79 billion of revenue. The revenue total soared 70% versus the same period a year earlier.

In 2022, the total amount of wagers placed with “sports betting companies” jumped 61% to $93.2 billion.

Positive Institutional Sentiment

That growth is likely a big contributor to institutional interest in DKNG stock. The shares currently score a high 85 on Fintel’s Fund Sentiment dashboard, ranking it in the top 10% of all the stocks assessed. That’s because institutional investors have piled into DKNG stock since the beginning of the second quarter. In January and February, relatively few shares of the name were acquired by institutions.

By April, that situation had changed dramatically, as more than 300 million shares of DKNG stock were bought by institutions in April, May, and June. Last month, institutions acquired about 320 million shares, not far below the peak level of 340 million reached in March 2022 and April 2022.

That institutional interest is growing as more Americans are permitted to wager. By the end of the year, more than half of the U.S. population will be able to utilize legal sports betting platforms, according to Roundhill, which offers The Roundhill Sports Betting & iGaming ETF (BETZ). DKNG stock is the largest holding in that exchange-traded fund’s portfolio, at 8.7% weighting of the 39 stocks.


Meanwhile, the sports betting sector is expected to become more profitable, with its EBITDA margin climbing nearly two percentage points this year, Bloomberg reported.

Analysts are Bullish on DKNG Stock

Investment bank BTIG last week named DKNG as one of its top picks, citing the strong growth of sports betting and the company’s efforts to control its costs. Also bullish on DraftKings stock recently was Oppenheimer, which hiked its price target on the shares to $56 from $50 while keeping an “outperform” rating on it.

Oppenheimer cites DKNG is gaining market share as its engagement is climbing and its handle, the total amount of funds wagered on its platform, is moving above that of its arch-rival, FanDuel, in the massive New York market. Oppenheimer views the latter situation as indicating that DraftKing’s superior “product quality is winning out.”

Analysts at Benchmark this week reiterated their ‘buy’ rating on DKNG stock, with a 12-month target of $29.40 per share. BofA Securities boosted the shares to ‘buy’ from ‘neutral’, also with a $29.40 target.

FanDuel is owned by Flutter Entertainment (PDYPY, FLTR).

DraftKings is also outpacing Flutter on Fintel’s Momentum quant score, garnering a dashboard leading 96.10 versus FLTR stock’s 76.07. That proprietary scoring model ranks companies on their six-month momentum.

Option Holders’ Sentiment Is Not Very Bullish

Yet, despite all of that optimism, data on options holders is not very bullish. The overall put/call ratio for DKNG stock is 0.98, according to data compiled by Fintel.

The put/call ratios of its options acquired on July 11, July 10, and July 7 were 0.98, 0.98, and 0.99, respectively. The put/call ratios of its options that expire on July 14, July 21, July 28, and Aug. 4 were 0.83, 0.99, 0.45, and 0.98, respectively, as of the afternoon of July 12.

This article originally appeared on Fintel

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

Source: Read Full Article