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DKNG Stock Alert: DraftKings Strikes Deal With Barstool Sports

Investors digest a causation-or-correlation argument

February 12, 2024 Feb 12, 2024, 12:55 pm EST February 12, 2024

DKNG stock - DKNG Stock Alert: DraftKings Strikes Deal With Barstool Sports

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On paper, online sportsbook DraftKings (NASDAQ:DKNG) secured a meaningful long-term catalyst. Late Sunday, following the end of the Super Bowl, Barstool Sports founder Dave Portnoy confirmed that the sports-oriented blog signed a multi-year deal with DraftKings. Though the recently concluded NFL championship saw record-breaking gambling interest, concerns related to the repeatability of the performance may have weighed on DKNG stock.

According to Investor’s Business Daily, the new partnership arrives before DraftKings releases its fourth-quarter earnings report late Thursday. Neither party disclosed financial terms. However, prior reports from Sportico indicate that the deal would encompass a traditional marketing partnership. This framework may involve Barstool promoting DraftKings odds. In return, Barstool would benefit from the sportsbook’s customer referrals.

Previously, Barstool declined to lend its brand to a sportsbook or a betting app. Further, earlier reports suggested that DraftKings would pay Barstool in the “low eight figures per year.”

Fundamentally, the long-term narrative seemingly bodes well for DKNG stock. As IDB reported, gambling interest spiked ahead of Super Bowl LVIII. This game represented the first NFL championship that Las Vegas hosted. Ahead of the big matchup between the Kansas City Chiefs and the San Francisco 49ers, analysts projected that a record 67.8 million American adults would bet on the game.

A Strong Economy or Taylor Swift? DKNG Stock Faces a Quandary.

According to the American Gaming Association, the record projected gambling figure printed a 35% jump from 2023. Additionally, this statistic represented 26% of the eligible population. In terms of dollar amount, analysts anticipated that betters would wager $23.1 billion on the game, a 45% jump from the $16 billion posted last year.

Perhaps most relevant for DKNG stock, people participating in casual wagers with friends or part of a pool or contest clocked in at 36.5 million people, a rise of 32%. And about 28.7 million adults (11% of the population) planned to bet via a legal U.S. sportsbook. Therefore, DraftKings theoretically will enjoy an expanded total addressable market, especially with the Barstool partnership.

However, the reason that DKNG stock may be slipping on Monday after the Barstool news could come down to the correlation-versus-causation debate. Barstool was not able to partner with DraftKings until after the Super Bowl due to a lockup agreement as part of its separation from Penn Entertainment (NASDAQ:PENN). As a result, DKNG shareholders must hope that future Super Bowls will generate similar interest.

Naturally, the hope is that the robust economy represents the key driver for the gambling spike. However, it’s also possible that interest spiked because of pop superstar Taylor Swift. As CBS News noted, StubHub reported a nearly three-times jump in ticket sales for Chiefs home games. Swift is in a relationship with one of the Chiefs’ key players, Travis Kelce.

Why It Matters

Irrespective of the drama associated with the Super Bowl, the main long-term catalyst for DKNG stock centers on legalization. Per Fortune, 38 states have legalized sports gambling. However, some notable exceptions exist, including California and Texas. If these states give the green light, the floodgates could potentially open for DraftKings.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Source: investorplace.com

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