DraftKings stock continued to climb back toward its peak on Thursday, rising to nearly $50 a share after analysts said a likely boom in sports betting will greatly increase the profitability of the Boston-based company.

DraftKings New Hampshire sportsbook
DraftKings launched the first retail sportsbook in New Hampshire at The Brook in Seabrook. Its stock price is rising after sportsbooks report rising revenue and analysts initiated buy ratings for DraftKings. (Image: DraftKings)

The stock rose to nearly $65 a share in early October, but dropped to about $35 a share later that month. This came amid concerns about how the COVID-19 pandemic would affect sports going forward after a bevy of postponements and cancellations of football games in the NFL and NCAA.

DraftKings Benefits from Hopeful News

The tide has turned back in the stock’s favor for a few reasons: hopeful news of a COVID-19 vaccine, an increased sports betting handle in key markets, and favorable ratings from analysts.

Pennsylvania, where DraftKings enjoys strong market penetration, announced on Tuesday that its sports betting handle surpassed $500 million in October. That’s more than double the total in 2019.

Loop Capital analyst Daniel Adam is more bullish on DraftKings stock than most. He gave the stock a buy rating and a $100 price target on Monday. Loop Capital believes the sports betting and iGaming market size could be $34 billion to $40 billion once 75% of the US population can access sports betting.

Adam notes that DraftKings now operates sportsbooks in 10 states (its smaller DFS operations are available digitally in all but a handful of states), reaching about 20% of the population. He expects that market penetration to reach nearly half of the US population next year after a few more states pass sports betting legislation this year.

“Bottom line: We believe [DraftKings] will emerge the clear share leader in online gaming given its powerful brand, early mover advantage and digital-first DNA,” Adam wrote.

Penn National Plays Catch-Up

Jim Cramer, the popular financial analyst for CNBC, agrees with the assessment. Cramer noted on his show that he writes a DFS column for DraftKings, adding “I think gambling in this country is going to be gigantic and there are only two real players: it is these guys and [Penn National.]

Adam initiated a hold rating and $69 price target for Penn National, which is only a few dollars more than the price at which the stock now trades. He noted the majority of the company’s revenue comes from its land-based casinos. Its sports betting app is also only live in one state.