Last week, along with the market retracement, shares of online sports betting company DraftKings (DKNG) dropped by 20%. The plunge cannot detract from the fact that since going public through a reverse merger in April, the stock has still outperformed the market considerably – up by over 70% (and by 210% since the turn of the year including the period prior to the reverse merger when trading as Diamond Eagle).
Some company insiders took advantage of the rally by unloading their shares last week. A recent SEC filing showed that DraftKings founder and other top brass offloaded $596 million worth of shares on June 23. Selling after a massive rally makes sense, but the extent of the offloading is curious, nonetheless.
However, Rosenblatt analyst Bernie McTernan dismisses the short-term noise and implores investors to “own shares for the long-term bull case.”
“As the gambling industry in the US is emerging, we believe online players will take the dominant share and DKNG should be a leader. Near-term catalysts to own the stock now are the return of live sports and the potential acceleration of gambling legislation from COVID-19. In our bull case, we believe the stock can triple,” McTernan said confidently.
Driving McTernan’s bullish thesis is the differentiated approach to gambling in the US, a legalized market still “in its infancy.” In contrast to other countries, the industry’s physical footprint is negligible, with a very low count of physical gambling retail locations.
This, along with “ubiquitous access to the internet, and sophisticated mobile apps,” leads the analyst to believe “the US gambling market is going to be significantly more remote relative to more established markets.”
Data backs up McTernan’s theory. For example, according to DKNG’s Analyst Day presentation, online gambling revenue across the globe accounted for only 12% of total industry revenue in 2019. The figure has risen to 40% in the UK, but even that pales in comparison to the US’s primary established sports betting market, New Jersey, where 90% of revenue is generated online.
“We believe NJ is emblematic of how the relative market shares of online vs physical locations will play out,” McTernan added.
Further down the line, McTernan considers DKNG’s global opportunity. The analyst believes there is potential for DraftKings to penetrate established markets “with an aim of becoming the Spotify of online gambling.”
Accordingly, McTernan rates DKNG a Buy along with a $60 price target. This conveys the analyst’s belief shares could appreciate by a hefty 80% over the coming months. (To watch McTernan’s track record, click here)
Other analysts are bullish, too. DKNG's Strong Buy consensus rating is based on 1 Hold vs. a resounding 9 Buys. Meanwhile the $46.67 price target implies nearly 40% upside from current levels. (See DraftKings stock analysis on TipRanks)
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Sentiment is fickle on Wall Street. Flavor of the day can quickly sour and become yesterday’s leftovers. Case in point: Capesize shipping company Seanergy Maritime (SHIP). Last week, the stock surged by 40%, after capesize shipping rates hit 2020 highs, but gave those gains back on Friday.
Despite the impact of COVID-19 on the globaliron ore trade industry, SHIP reported decent 1Q20 earnings results last week.
Net operating revenue came in at $7.64 million, up 13% year-over-year. Not to mention this figure beat the consensus estimate by $0.34 million. SHIP posted a small bottom line beat, too, with Q1 GAAP EPS of -$0.31, $0.01 above the Street’s call.
So, it is unlikely SHIP shares were sold off following the upbeat quarterly statement. Most likely, shares were sent tumbling when SHIP announced a plan to go ahead with a 1-for-16 reverse stock split, in order to comply with Nasdaq listing regulations. The company had until September 25 to get the share price up to the required $1 minimum listing price, but decided to resolve the matter beforehand. The split will go into effect tomorrow, June 30. Evidently, investors expect shares to sink further once they start trading on a split-adjusted basis.
That said, Seanergy says encouraging steel demand in China, historically low iron ore inventory levels and signs of a recovery in Brazilian iron ore exports are bullish signals for a much stronger capesize market in 2H20.
Maxim analyst Tate Sullivan agrees, and believes the rising shipping rates bode well for the rest of the year.
“Since 1Q20, the average daily TCE (time charter equivalent) rate of the Capesize Index increased to about $29,400, from levels as low as $2,000 in May 2020 during volatile shipping rates as the world adjusted to COVID-19…. We maintain our Buy rating based on our outlook for SHIP to benefit from a rebound in international shipping activity and higher rates,” the analyst said.
Along with the vote of confidence, Sullivan has a $0.30 price target on the stock. Investors could be shipping home an 91% gain, should the analyst’s thesis play out over the coming months. (To watch Sullivan’s track record, click here)
Only one other analyst has chipped in with a review of SHIP over the past three months, also rating the stock a Buy. Therefore, the company gets a Moderate Buy consensus rating. This is accompanied by a $0.40 average price target, which implies potential upside of a strong 155%. (See SHIP stock-price forecast on TipRanks)
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