DraftKings has seen major growth since launching in 2012, when the company began offering Americans the chance to play daily fantasy sports (DFS) contests. The Boston-based firm has since grown well beyond DFS, becoming one of the country’s largest sportsbooks after a 2018 Supreme Court ruling paved the way for expanded sports wagering in states other than Nevada.
The company has since also moved into online gaming in legalized states as well. Now, according to a new report by gaming consulting firm Eilers & Krejcik, DraftKIngs is the leading online gaming operator in the country.
Eilers & Krejcik notes that this “is a major move that signals a shifting competitive landscape — one that we believe will continue to shift as big new brands Fanatics and ESPN Bet begin to ramp.”
Company Surges as Other Enter Market
The recent report takes into account both sports betting and other online casino games. As of August, DraftKings had secured 31% of the market, edging out FanDuel, which held the lead in the U.S. for several years, by a single percentage point.
The two companies have battled for the lion’s share of customers in the sports betting market, which has seen more than two-thirds of American states legalize wagering. When considering sports betting alone, FanDuel retains its lead with a 39.3% market with DraftKings checking in at 34.1%. Those numbers may indicate just how important DraftKings Casino is becoming for the brand.
However, the iGaming and online sports betting industry remains competitive with new companies even recently entering the market. In August, casino and online gaming operator Penn Entertainment announced a deal with ESPN to launch a new betting product with the network in a $2 billion, 10-year deal. The companies plan to launch ESPN Bet in November and the agreement includes considerable promotion and integration with the network.
Fanatics, the sports apparel and merchandise company, also brings a well-known brand to the industry. Fanatics purchased PointsBet’s U.S. operations in May for $225, allowing the apparel firm to enter the U.S. gaming market.
The move immediately allows Fanatics to offer wagering in Colorado, Iowa, Kansas, Maryland, New Jersey, Pennsylvania, Virginia, and West Virginia. The company has promised to enter other markets in the coming months as well.
“We are excited about what we are building at Fanatics Betting and Gaming and this acquisition accelerates our plans,” Fanatics Betting CEO Matt King said. “We have a 10-year plan that focuses on the customer and not market share. We are going to acquire customers efficiently, allowing us to return savings to customers by investing in the customer experience at Fanatics Sportsbook and PointsBet, a Fanatics Experience.”
Whether ESPN and Fanatics Sportsbook can gain significant market share in sports betting and online gaming remains to be seen however. Some have argued that ESPN waited too long to latch on to a gaming partner and may have missed the boat. Fanatics brings a large base of sports-loving customers, but can that translate to wagering as well?
For its part, DraftKings officials say the company isn’t resting despite the recent leap into the No. 1 spot among U.S. online gaming operators. Responding to a Twitter post of the company’s growth in comparison to competitors, DraftKings co-founder Matt Kalish noted: “We enjoy the chart, but no one is anywhere close to satisfied yet at DraftKings!”
DraftKings Receives Stock Upgrade
If the success with market share weren’t enough, DraftKings also received some good news when it comes to the value of the company’s stock this week. Analysts with MoffettNathanson has given the company’s stock a “buy” rating and raised the research firm’s target price to $37 from $31.
The news gave the stock price an initial bump, but shares closed at $27.35 on Wednesday. MoffettNathanson gave approval to DraftKings CEO Jason Robins’ vision for the company over the last year, as outlined in a letter to shareholders in 2022, that included focusing on becoming profitable soon while also investing in long-term competitive advantages. As noted above, those efforts seem to be paying off when it comes to market share.
“Since then, DraftKings has delivered on both fronts, with expenses coming in much better while revenues continue to outperform expectations,” MoffettNathanson noted. “There is a clear line of sight to profitability, with guidance for meaningfully positive adjusted EBITDA in 4Q 2023 and a full year of adjusted EBITDA profitability in 2024.”
The research firm expects the gaming operator to reach profitability by 2025. MoffettNathanson also reports that “improving its products and landing VIP customers” has helped close the market share gap with FanDuel.
