Summary
- DraftKings has seen a lot of bullish options in the month of December.
- The bets are likely due to talks that more states will allow online betting.
- However, the stock isn't cheap despite a bullish technical chart.
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DraftKings (NASDAQ:DKNG) could be heading much higher in the coming weeks, based on a rather large options bet. Additionally, the sales outlook is likely to improve, especially if more states make online betting widely available.
Now that many states face revenue shortfalls due to the coronavirus pandemic and wider budget deficits, there may need to be a push to fill that gap. Online betting could be one of those sources.
Oppenheimer recently noted that New York could be one of those states and believes that neighboring states like Massachusetts, Connecticut, and Ohio could soon follow.
The prospect of more states coming online could be one reason why analysts have been raising their sales estimates for the company over the past six months. Analysts now see sales rising by more than double by 2022 to $1.2 billion from its current revenue of $551 million over the trailing twelve months. More encouraging is that analysts have increased their revenue outlook for the business. It was just in July that analysts saw 2022 revenue of around $999 million.
It isn't to suggest the stock is cheap, though; it isn't on a price to sales multiple based on those 2022 sales estimates, which is currently at 17.9. Penn National Gaming (PENN) trades for just 2.6 times sales estimates, which happens to be the only viable metric to value DraftKings since it is not expected to have earnings or even EBITDA through 2022.
Betting on Higher Prices
Still, the hope and optimism around what may be coming down the road are certainly prompting someone to make take on a major bet that DraftKings rises by more than 7% over the next month.
