JPMorgan upgrades this sports betting stock that can rally 35%

A recent bout of underperformance has created an entry point into DraftKings , according to JPMorgan. Analyst Joseph Greff upgraded the sports betting stock to overweight from neutral and raised his price target by $11 to $37. His new price target implies an upside of 35.2% from Monday’s close. “We are taking advantage of sluggish share price performance since late July,” Greff said in a note to clients Tuesday. He said it’s “an appealing sector, with attractive same-store and new market growth prospects, against the backdrop of an industry-wide improving operating expense control environment.” Shares climbed 3.7% in premarket trading following the upgrade. Greff noted the stock’s recent pullback created a buying opportunity. The stock has fallen about 13% since July, while the S & P 500 pulled back about 6%. Even when accounting for the pullback, it’s been a strong year as the stock has surged more than 140% since 2023 began. That marks a notable turn after ending 2021 and 2022 down about 41% and 58.5%, respectively. Greff said the company’s operating expense environment should improve in part due to the fact that a shrinking share of revenue comes from new markets. That’s because these newer spaces can require the company to pay significant new user acquisition costs and offer up-front investment to get them off the ground. He also said the company’s product, scale and brand create a moat. That can help DraftKings compete against newer entrants into sports betting such as Penn Entertainment ‘s ESPN Bet and Fanatics in the same way it could stand tall against Caesars . The firm also updated its forecasts for the company. Notably, Greff said to expect a sports betting market size of $23.2 billion in the U.S. and Ontario by 2030. iGaming’s market size during the same timeline and in the same locations should near $13.5 billion in 2030. — CNBC’s Michael Bloom contributed to this report.