An analyst covering the firm says that DraftKings (NASDAQ: DKNG) is the finest online betting stock to hold heading into football season.

Macquarie analyst Chad Beynon emphasized the well-known seasonality connected to sports betting stocks like DraftKings in a letter to clients today. To put it simply, football is the sport on which Americans wager the most, and the start of the season frequently results in positive returns for online sports betting stocks, such as DraftKings. He pointed out that some of the hold problems that have plagued the operator in prior fourth quarters are probably going to be resolved.

"While history has shown that holding the stock for the two months leading up to opening NFL week has been most profitable, we think much of the 4Q stock softness in recent years can be attributed to DKNG’s hold falling 50-100bps below market expectations for September through December,” wrote the analyst. “Given current 3Q hold/ growth trends, an easier year-over-year hold comp in 4Q, and recently recalibrated ’24 guidance, we think DKNG is well positioned to exceed expectations in 2H.”

Beyoncé reaffirmed her "outperform" rating on DraftKings, indicating a potential upside of over 42% from the current closing, with a $50 price target.

Additional Football Incentives for DraftKings

DraftKings' price has decreased by 3.33% in the last month, which may indicate that the stock hasn't yet adjusted for the football season. The 2024 college football season kicks out this Saturday, and the NFL season begins on Thursday, September 5.

The assumption that bettors will wager on more NFL games this year than they did in previous years is a more appealing potential driver for DraftKings and its competitors. Football handle as a whole will rise since more states than ever allow sports betting, but smaller betting menus offered by operators—which include same-game parlays and in-game wagering—may result in higher numbers of bettors per wagerer.

These are some of the explanations for why the gaming industry's long-term growth is largely seen to be driven by the internet. That assumption is supported by the prospect that more states will legalize internet gaming.

“Thus, we view any pullback in the sector from consumer sentiment, regulatory headlines, or low hold as a long-term buying opportunity, with much of the sector now generating positive free cash flow at reasonable valuations,” added Beynon.

Other Football Season Concerns to Keep an Eye on

As America's most popular sport develops over the next several months, there are a few more operator-specific concerns to keep an eye on in addition to the potential impact that football season may have on DraftKings shares. These include the potential for smaller competitors like Fanatics and ESPN Bet from Penn Entertainment (NASDAQ: PENN) to outperform FanDuel and DraftKings.

While some experts and investors think ESPN Bet's success or failure will be determined by the 2024 football season, others are interested in seeing how Fanatics would fare in the event of increased promotional spending.

“1) Do Missouri residents vote in favor of legalizing OSB in Nov (10% proposed tax rate)? 2) Does DKNG close the gap between its handle and GGR market share? 3) Will Fanatics hold on to its recent market share gains during the promotionally high NFL period ? 4) Will ESPN BET monetize its active user base to increase GGR share and how will its NY launch go? 5) Will BetMGM get a material boost from having one digital wallet across states?,” concludes Beynon.