Stocks to buy

The NFL playoffs kick into high gear this weekend, with only eight teams remaining. After that, it’s time for the conference championships and then… the Super Bowl. That could be great news for investors looking to wager on DraftKings (NASDAQ:DKNG) and other sports betting and casino companies.

Sure, it’s a cliché to refer to big events as the Super Bowl of something. But Feb. 11 is the legitimate Super Bowl, and millions of Americans are expected to place bets on DraftKings, FanDuel and other popular sports apps. So, this is the Super Bowl (literally) for sports betting stocks.

Super Bowl Promises to Be Superb Day for Sports Betting

The American Gaming Association said last February that more than 50 million people bet about $16 billion on the 2023 Super Bowl, where the Kansas City Chiefs and Taylor Swift’s boyfriend Travis Kelce defeated the Philadelphia Eagles. The AGA said that the 2023 figures were a record for both the number of people betting and money wagered, and it seems likely that 2024 will wind up surpassing last year’s numbers, especially now that Vermont has legalized online betting. DraftKings, FanDuel and Fanatics are the three companies with sports gambling operations in the Green Mountain State.

With that in mind, it’s no wonder that DraftKings shares have surged nearly 13% in just the past week… and are now up more than 165% in the last 12 months. But there are other reasons to be bullish about DKNG stock.

DraftKings has already been dealing with lots of competition from FanDuel as well as traditional casino companies, such as MGM Resorts (NYSE:MGM), Caesar’s Entertainment (NASDAQ:CZR) and Wynn Resorts (NASDAQ:WYNN). That’s why investors don’t seem too worried about the fact that Disney’s (NYSE:DIS) ESPN is now making a big play in the sports betting arena.

ESPN made a deal last year with casino company Penn Entertainment (NASDAQ:PENN) to rebrand Penn’s Barstool Sports app as ESPN Bet. (ESPN will get $1.5 billion in cash and $500 million in PENN stock over the next 10 years).

Despite initial concerns among DKNG investors that Disney/ESPN would eat into DraftKings’ market share as it heavily promoted the ESPN Bet app on TV and digital platforms, DKNG has held up well so far in the face of this competition.

Simply put, the legal sports betting market is massive and can support multiple companies. With that in mind, Wall Street analysts remain bullish on DraftKings stock; 26 of 30 analysts covering it have it rated a “buy.” Analysts are even predicting that DKNG, which has spent heavily on marketing and promotion over the past year as it rolled out in more states, will report a small profit in the fourth quarter of 2023 and that losses for 2024 will narrow dramatically. Revenue is expected to surge nearly 30% this year.

And 3 Other Reasons to Buy DKNG Stock

There are other catalysts to support a DraftKings rally. For one, the stock has been the target of short sellers who have worried about the increased competition in sports betting. But the shorts have been on the wrong end of that trade for a while now, and with about 7% of the available float still being held by short sellers, there’s the potential for a squeeze if DKNG reports strong fourth-quarter results in February and big betting numbers for the Super Bowl.

Beyond the NFL’s big game next month, DKNG investors (and bettors) also have the NCAA college basketball tournament to look forward to as well. March Madness is almost as big an event for gamblers as the Super Bowl, with the AGA estimating that betters spent $15.5 billion last year.

It’s also worth noting that FanDuel, which U.K.-based Flutter Entertainment (OTCMKTS:PDYPY) owns, will later this month make its debut on the New York Stock Exchange. This move should boost exposure for DraftKings on Wall Street as well, as it helps to further validate the sports betting sector. DKNG investors have even brushed off the news that Cathie Wood’s Ark Invest recently sold a chunk of DraftKings shares. The stock has continued to rally. So, it looks like there are still many good reasons to keep wagering on DKNG stock.

As of this writing, Paul R. La Monica did not hold (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.

Paul R. La Monica is a veteran financial journalist with nearly 30 years experience (including more than 20 at CNN) covering the stock market and other asset classes, the economy and other corporate and business news.

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