DraftKings M&A Strategy: Key Focus for 2025
DraftKings, a popular name in the world of online sports betting and iGaming, is gearing up for a strategic move in 2025 by focusing on mergers and acquisitions. After a challenging 2024 in terms of Wall Street guidance, the company is looking to make some key changes.
According to Deutsche Bank analyst Carlo Santarelli, DraftKings is currently trading at 22 times adjusted EBITDA with a 4% free-cash-flow yield. With guidance suggesting a 46% flow through on expected incremental net revenue growth in 2025, the company has set ambitious targets for the year ahead.
Legislatively, Santarelli sees Texas as a significant opportunity for online sports betting in 2025. However, any delays in legalization could set the state back by a couple of years. California and Florida, on the other hand, present different challenges due to tribal partnerships that may be required for operations. These partnerships could affect the overall profitability of these markets.
Looking at the broader picture, Santarelli points out that states like New York, Ohio, Illinois, Indiana, Maine, and Maryland are all in discussions about legalization, but the prospects for success in 2025 remain low. DraftKings, known for its aggressive acquisition strategy, is likely to continue pursuing mergers and acquisitions to enhance its market presence.
With a solid financial position and cash reserves, DraftKings is expected to keep acquisitions as a key part of its strategy moving forward. The target price set by Deutsche Bank is $33, based on a multiple of 17.5 times its 2025 EBITDA forecast. This valuation, combined with net cash estimates, places the equity value of DraftKings at $17 billion.
As DraftKings navigates the complexities of the online betting landscape, its focus on mergers and acquisitions could play a crucial role in shaping its future success. Investors and industry watchers will be keeping a close eye on how the company adapts to changing market dynamics in the coming year.
