The maturing sports betting market should reveal the strength of DraftKings and push the stock higher, according to Citi. Analyst Jason Bazinet initiated coverage of DraftKings with a buy rating, saying the company's early foothold in the sports betting should pay off in the years ahead. "We estimate the value of a DraftKings sub will increase from $1,750 in 2021 to $4,900 by 2024. The appreciation in the EV per sub is driven by: 1) higher [average revenue per user], 2) higher gross profit margins and 3) lower [customer acquisition costs]," the note said. Citi estimates that DraftKings will have just under 3 million daily users by 2023. The firm set a $66 per share price target, which is 37.7% above where the stock closed Friday. DraftKings and its competitors were hot stocks in 2020 as several states moved toward legalizing sports gambling, but the industry has fallen out of favor this year. Shares of DraftKings are up just 2.9% year to date. In addition to DraftKings, Citi also initiated software companies Genius Sports and Sportradar as buys. The firm sees steady growth for the industry through the first half of this decade. "We expect the global [online sports betting] market to grow 17% per annum from 2019 to 2025 underpinned by faster growth in the US (due to regulatory tailwinds)," the note said. "We expect the iGaming market to grow at a similar pace of 16% per annum from 2019 to 2025." —CNBC's Michael Bloom contributed to this report.
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The maturing sports betting market should reveal the strength of DraftKings and push the stock higher, according to Citi.