Passing on DraftKings
Sep 9, 2024
Well-known online sports betting outfit DraftKings (DKNG) recently appeared on the Green Screens after reaching cash profitability over the prior 12 months. There are some things to like. DK has grown over 60% in each of the last 2 years, and is tracking for 30%+ growth in each of the next 2. DraftKings has fought with rival FanDuel for #1 market share for the last several years (both have 30-35% share). That said, there are more things not to like. The space is getting increasingly crowded, with aggressive entries from known entities like MGM, Caesar's, ESPN/Barstool, and others. There are no switching costs or any other kind of moat. The legalization wave has pretty much run its course, so there aren't many new states to expand into - industry growth forecasts are good but not great at 7.5% annually through 2029. And DraftKings, despite huge scale, is still only marginally cash profitable. It isn't for me, and GreenDot Stocks is passing on it.
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