Smaller sports betting stocks benefits from latest acquisitions - The Average Joe

    Smaller sports betting stocks benefits from latest acquisitions

    Victor Lei β€” Head of Research

    September 22, 2021

    sports betting acquisitions

    September 22, 2021

    DraftKings (NASDAQ:DKNG) made an offer to acquire Entain, a European sports betting giant, for $20B. But investors don’t seem excited about the news β€” sending DKNG down 7.5%.

    What’s the big deal? Not another month goes by without announcements or rumors of a sports betting acquisition. Last month, it was Penn National Gaming buying Toronto-based Score for $2B.

    This isn’t the first time someone tried buying Entain.

    • Early this year, MGM tried acquiring Entain for $11B β€” a low offer that was rejected.
    • Entain, which could be DKNG’s biggest acquisition to date, would significantly expand DraftKings’ overseas presence.

    Smaller is better: Unfortunately for DraftKings investors, smaller sports betting firms investors are benefiting from the action:

    • Golden Nugget (NASDAQ:GNOG) is up 60% after announcing its acquisition by DKNG in August.
    • Rush Street Interactive (NYSE:RSI) is up 45% in the past month on momentum from the industry.

    RSI was seen as a potential acquisition target by Will Hershey, CEO of sports betting ETF creator, Roundhill Investments.

    Looking forward: It hasn’t been a great year for DraftKings’ stock β€” which traded sideways in 2021 β€” but analysts are feeling optimistic.

    • Analysts raised their price target on DraftKings after a strong start to the NFL football season β€” which started 2 weeks ago.
    • Average $72 price target on DKNG among 16 analysts, implying 30% upside.

    Research firm, Eilers & Krejcik Gaming, estimates that US sports betting sales could reach $19b if all 50 states legalized β€” up nearly 3x from an estimated $5.8b in sales next year.

    With 22 states legalized and 8 more coming online, the industry has plenty of growth to come β€” meaning investors could expect more acquisitions by large sports betting firms fighting for market share.

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