As the National Football League’s playoffs begin, CNBC’s Jim Cramer on Friday told investors why he thinks it’s a good time to buy sports betting platform DraftKings, whose stock has recently pulled back.
“DraftKings already has a lot going for it,” he said. “And when you consider how the stock tends to run during the NFL playoffs, you’ve got my blessing to put on a position here.”
Cramer referenced the stock’s performance from the end of the year through the Super Bowl over the past few years and noted that shares tend to rally during that time. He conceded that DraftKings fell over that period in 2022 but said it was a bad time for most stocks — especially growth stocks — as the market braced for rate hikes from the Federal Reserve.
But he said he’s positive on the stock for more than just favorable odds, saying he likes the company’s fundamental business. Cramer pointed out that while sports betting is not yet legal in several key states, it is expanding to sizeable markets like Missouri. He also agreed with DraftKings CEO Jason Robins, who predicted significant growth for the industry and said it remains in early innings in the U.S. The company also does a good job of increasing its customers’ use of parlays, which tend to be more profitable bets for sportsbooks, Cramer said.
The stock’s recent losses, Cramer continued, are primarily due to a bit of bad luck — gamblers have been unusually lucky over the past year, with favorites winning at a higher rate than normal. To Cramer, DraftKings is set to accelerate profits once this anomaly peters out, which he said should happen naturally over time. And while DraftKings is a buy here, he warned that the stock could be in for further losses if it follows in the footsteps of Flutter, the company behind competing platform FanDuel. Flutter disclosed earlier this week that the current NFL season has been “the most customer friendly since the launch of online sports betting with the highest rate of favorites winning in nearly 20 years.”
“While we got the disclosure about the customer friendly sports outcomes impacting their number one competitor, we haven’t yet gotten that same disclosure from DraftKings,” Cramer said. “This potential announcement could cause the stock to sell off again, even if a lot of that, I think, is already baked in.”
DraftKings did not immediately respond to request for comment.
