What happened
Shares of DraftKings (DKNG 0.59%) climbed sharply higher on Friday, surging as much as 6.3% early in the session. As of 11:17 a.m. ET, the stock was trading up 3.2%.
The catalyst that sent the online betting and fantasy sports company higher was some positive coverage by a Wall Street analyst and news it would launch in a new state in the coming week.
So what
Piper Sandler analyst Matt Farrell initiated coverage of the stock with an overweight (buy) rating and $21 price target, which represents potential upside for investors of roughly 41% compared with Thursday's closing price.
The analyst cited DraftKings' position as the leader in the online sports betting market and its growing presence in internet gaming. Furthermore, with a total addressable market of $80 billion in the U.S. and Canada, this gives the company a long runway for growth. Given those factors, this represents an attractive entry point, particularly as the need to raise capital is "largely diminished," according to Farrell.
As if to punctuate that point, DraftKings announced that it's slated to launch its online sports betting business in Maryland next week, pending regulatory approval. The company's early access test period will take place on Nov. 21 and 22. If all goes well, the official launch is scheduled for Nov. 23.
This will give eligible DraftKings customers access to its top-rated sportsbook app in time for the "NFL action on Thanksgiving Day," the company says in a press release.
Now what
Like many stocks, DraftKings has plunged over the past year, down 59% from its high. While the company's top-line growth has been laudable, investors have lamented its mounting losses.
That said, for investors with the appetite for a little risk, DraftKings is trading near its cheapest valuation ever, at just 2.4 times next year's sales, when a reasonable price-to-sales ratio is between 1 and 2 -- putting it near bargain-basement territory. Given its industry-leading position and potential growth opportunities, that's not a bad price for all that potential.
