A DraftKings Inc (NASDAQ:DKNG) analyst says the sports betting company could benefit from the Jake Paul vs. Mike Tyson fight and the growing total addressable market for the sector.

The DraftKings Analyst: Goldman Sachs' Ben Miller reiterated a Buy rating on DraftKings with a $57 price target.

The Analyst Takeaways: Management commentary on DraftKings shows a path for a higher total addressable market (TAM).

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And Miller, in a new investor note, called the Paul/Tyson boxing event a success,

DraftKings CFO Alan Ellingson and Senior Director of Finance Michael DeLalio met with Miller. The themes discussed included the growing TAM opportunity, strong new customer acquisition, and a path for new state legalization.

Cross-selling and lower customer acquisition costs were also key themes during the meetings.

Miller said DraftKings had strong app downloads and customer acquisition thanks to the Paul/Tyson bout. Paul's winning via decision versus many customers betting on a Tyson win could be a potential tailwind for DraftKings, Miller added.

The path to compounding profitability should allow for both organic investment in the business and to return capital to shareholders.

"With new regular disclosure around OSB & iGaming to come, mgmt. appears to be aiming to be more shareholder friendly around disclosure, which is likely to continue," Miller said.

In the third quarter, the company acquired 14% more OSB and iGaming customers year-over-year. With the acquisitions done, there was a 20% lower year-over-year customer acquisition cost, Miller added.

The launch in Missouri and $1 billion authorized share buyback could be two near-term items to watch along with customer acquisition heading into 2025.

"We see near-term debates focused on the competitive intensity as we progress through the remainder of the NFL season (and beginning of NBA)."

Longer term, DraftKings can benefit from online gaming TAM expansion, improving unit economics and being able to return capital to shareholders, Miller says.

Several large states like California, Florida and Texas could have legalization in the years ahead. Management is confident in the path being a matter of timing or ironing out specific details, Miller added.

Miller also said increased in-play betting could be a growth item to watch.

"In-play betting is an opportunity to drive greater levels of engagement and potentially open up cohorts of customers that can help drive incremental gross profit dollar contribution."

Price Action: DraftKings stock traded at around $43.51 at last check on Wednesday versus a 52-week trading range of $28.69 to $49.57. DraftKings stock is up 29% year-to-date in 2024.

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