CNBC's Jim Cramer on Tuesday told investors there's a buying opportunity in online sports betting company DraftKings as it experiences a pullback during NFL playoff season.
"Now that DraftKings has pulled back a bit from its highs over the past month and a half, and after we saw the incredible public interest in the first weekend of the NFL playoffs, I'm feeling like you're getting a great buying opportunity in this stock," Cramer said. "If you don't already own DraftKings, you should consider adding a position, especially for the next couple weeks as seemingly the whole country is watching the NFL."
Cramer explained his bull thesis for DraftKings, starting by saying the company has the most market share in the sector. DraftKings emerged from a few years of intense competition as the industry leader, Cramer said, adding that the scenario is a "last man standing" story like Uber in the ride-share sector or DoorDash in food delivery.
Now that the battle for market share is over, Cramer said the company can focus on boosting profitability and spend less money on marketing and advertising.
DraftKings's third-quarter report in November 2023 showed earnings that came in ahead of analysts' expectations. The company reported 2.3 million monthly unique players in the third quarter, representing a 40% increase year over year.
Cramer noted that DraftKings has been growing despite not being able to do business in California and Texas where sports betting is illegal. He said he predicts the company will see a major boost if those states make sports betting legal.
This stock also tends to do well during the NFL postseason, Cramer said. Measuring its performance from the new year until after the Super Bowl over the past three years, DraftKings averaged a 21% gain, according to data calculated by Mad Money researchers, Cramer said.
"This was a difficult story when the sports betting industry was getting flooded with infinite money from venture capital firms," Cramer said. "But that money dried up a while ago, and now DraftKings has emerged as the online sports betting champion at a time when they can finally get away with cutting costs, because everybody else is doing it, too."
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