How about those NFL draft picks Thursday night?
It was an unusual process seeing all those drafts conducted with players and coaches in their homes, but the picks were anything but disappointing this year.
Personally, if you want my ratings on the best picks, I’m giving an A+ to Joe Burrows from LSU. The kid has all the potential to shake up the pro football world and become the next big quarterback star. Good choice by the Bengals.
I’m also giving A’s to Chase Young for the Redskins (love his pass-rushing), Derrick Brown for the Panthers (reminds me of the late Jerome Brown), and Henry Ruggs III for the Raiders (can’t believe how fast he runs).
Aside from me being a sports fanatic who played basketball at the pro level, I mention all this for one big reason.
These draft picks to coincide with an exciting company that just went public.
The popular American fantasy sports contest and sports betting provider, DraftKings, began its public offering on the Nasdaq exchange yesterday under the ticker symbol DKNG.
Technically speaking, DraftKings did not IPO. It went public thanks to a reverse merger deal with Diamond Eagle Acquisition Corp, as a special purpose acquisition company (SPAC).
I wrote more about how that process works in my post here.
Regardless, today I want to explain why DKNG is now a very exciting longer-term opportunity… one that could take advantage of this coronavirus selloff and potentially lead to some big profits down the road.
DraftKings Could Catch a Pop Alongside the Whole Sports and Gaming Sector
Jeff Bishop and Jason Bond would both agree with me that while the sports and gaming sector has been hit hard by the coronavirus, they will likely have one of the biggest reversals this year.
WYNN, LVS, MGM, PENN are all good investment choices, as they will probably show an awesome turnaround once sports are going again and casinos/ tracks are open.
Even the full-service restaurant and arcade stock, PLAY, would even be good too. We spent some time hanging out at one of this company’s many locations while in Orlando during the 2020 RagingBull conference and it’s a whole lot of fun.
At the moment, no baseball, basketball, and hockey games are being played. Football season kicks off in late August for college and in September for the pros, but it remains to be seen whether this will get delayed.
So while it may surprise you that a company like DraftKings decided to stage its public debut without many live sports even available to bet on, it could be a spectacular buying opportunity for us.
The DraftKings CEO, Jason Robins, is confident at the very least. He thinks that DraftKings can do well even in this environment — and, after all, it’s only a matter of time before sports open back up.
Even in this environment where the number of wagers placed on the DraftKings website has been down over the recent months, people are still finding stuff to bet on.
Betting on table tennis has seen an explosion.
Someone even laid down a big bet that the Niners would even up with Neal Young. That person would have wound up with a $175,000 payout had Young not gone to the Redskins.
So all in all, I would agree with Robins when he said, “We have a good story that resonates with investors for the long-term.”
On Top of A Good Story, DraftKings Numbers Look Good Long-Term
Going the SPAC route was incredibly logical for DraftKings in this environment. It’s allowed them to set aside the difficulties of raising IPO money in the traditional way.
The company already has $400 million in cash in a trust account and an additional $300 million has been pledged through a private equity deal.
Now, thanks to the SPAC deal, Diamond Eagle Acquisition Corp. (DEAC) paid $2.7 billion in cash and stock for DraftKings and the sportsbook technology supplier SBTech — the grand majority going to DraftKings.
Diamond Eagle Acquisition Corp. has a significant growth prospect DraftKings.
They believe DraftKings will have a compound annual growth rate of 31%+ from 2017 to 2021. That much growth would indicate revenues of $460 million.
That’s all in part thanks to the growth of the online sports betting and iGaming industry in the U.S. Online sports betting revenues will grow to $18 billion and iGaming will grow to $21 billion.
Given that the partnership between DraftKings and SBTech is the largest in the industry, DraftKings could reach anywhere from $2.9 billion to $4.7 billion in annual revenue.
The only caveat is that DraftKings is still not yet profitable. The company lost $142.7 million last year even though revenues surged 43% to $323.4 million.
The reason is that the company did some extensive platform development and had three new state losses.
But given all the long-term potential I’m seeing in DraftKings, as well as a strong opportunity to ride the coronavirus rebound once sports open back up, it’s a stock that I’m going to be keeping a very close eye on.
While I can’t guarantee I’ll jump in right away, my premium IPO Payday subscribers will be the first to know if I do.