Smaller sports betting stocks benefits from latest acquisitions
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 — 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 — 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 — which traded sideways in 2021 — but analysts are feeling optimistic.
- Analysts raised their price target on DraftKings after a strong start to the NFL football season — 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 — 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 — meaning investors could expect more acquisitions by large sports betting firms fighting for market share.