Super Bowl 56 is here. The matchup between the Cincinnati Bengals and Los Angeles Rams is poised to be an epic battle. According to demand-intelligence company PredictHQ, the game could draw a record TV audience of 117 million.
Keeping with the sports theme, it could be an excellent time for investors to consider adding DraftKings (DKNG -0.08%) stock to their portfolios. The finale of the National Football League's season is expected to generate $7.6 billion of wagers on the outcome of the game.
Super Bowl 56 could drive a surge in new customers for DraftKings
Mobile sports betting is a relatively new phenomenon in the U.S. The Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA), allowing states to individually legalize the activity. DraftKings is benefiting from the trend. The company offers mobile sports betting in 17 states, including its recent launch in New York.
DraftKings' revenue growth was accelerated from 17.9% in 2018 to 90% in 2020. The company is on pace to boost that higher when it reports results for its fourth quarter and 2021 on Feb. 18. The current year is also looking solid with DraftKings' launch in New York, a market that could generate $1 billion annually in gross gaming revenue.
As of Sept. 30, DraftKings boasted 1.34 million average monthly unique players. That was up from 1.021 million during the same time the previous year. It will undoubtedly get a boost from the big game. According to the American Gaming Association, a record 31.4 million people in the U.S. will make a wager on the Super Bowl.
To highlight how remarkable that figure is, consider that DraftKings boasts an online sportsbook market share of 33%. If it maintains that percentage of folks planning to wager on the Super Bowl, it will add roughly 10 million new customers. But remember that this is an estimate derived from an estimate.
Still, DraftKings will undoubtedly gain a surge of new customers during this significant sports event. Interestingly, whether it will result in a boost of revenue immediately is not certain. That will depend on the outcome of the Super Bowl. The American Gaming Association estimates that 55% of people will be betting on the Los Angeles Rams to win the Super Bowl. However, data from DraftKings showed 54% of the total wager value is for the Cincinnati Bengals to overcome the Rams. So it looks like DraftKings shareholders will be rooting for the Los Angeles Rams in Super Bowl 56.
Why now could be an excellent time to buy DraftKings stock
The surge in customer interest in sports wagering is a boon for DraftKings. Management has drawn concern from investors over its heavy spending on customer acquisition. DraftKings spent 85% of revenue on sales and marketing in its most recent quarter. An organic increase in customer signups will go a long way toward reducing acquisition costs.
The high percentage of spending on sales and marketing is one reason DraftKings stock is down 49% in the last three months. The stock is now trading at a price-to-sales ratio near its all-time low of 7.6. The discounted price, continuing momentum for legalization, and the potential surge of new signups from the Super Bowl make it an excellent time to consider adding DraftKings stock.