DraftKings stock continued to climb back toward its peak on Thursday, rising to nearly $50 a share after analysts said a likely boom in sports betting will greatly increase the profitability of the Boston-based company.

The stock rose to nearly $65 a share in early October, but dropped to about $35 a share later that month. This came amid concerns about how the COVID-19 pandemic would affect sports going forward after a bevy of postponements and cancellations of football games in the NFL and NCAA.

DraftKings Benefits from Hopeful News

The tide has turned back in the stock’s favor for a few reasons: hopeful news of a COVID-19 vaccine, an increased sports betting handle in key markets, and favorable ratings from analysts.

Pennsylvania, where DraftKings enjoys strong market penetration, announced on Tuesday that its sports betting handle surpassed $500 million in October. That’s more than double the total in 2019.

Loop Capital analyst Daniel Adam is more bullish on DraftKings stock than most. He gave the stock a buy rating and a $100 price target on Monday. Loop Capital believes the sports betting and iGaming market size could be $34 billion to $40 billion once 75% of the US population can access sports betting.

Adam notes that DraftKings now operates sportsbooks in 10 states (its smaller DFS operations are available digitally in all but a handful of states), reaching about 20% of the population. He expects that market penetration to reach nearly half of the US population next year after a few more states pass sports betting legislation this year.

“Bottom line: We believe [DraftKings] will emerge the clear share leader in online gaming given its powerful brand, early mover advantage and digital-first DNA,” Adam wrote.

Penn National Plays Catch-Up

Jim Cramer, the popular financial analyst for CNBC, agrees with the assessment. Cramer noted on his show that he writes a DFS column for DraftKings, adding “I think gambling in this country is going to be gigantic and there are only two real players: it is these guys and [Penn National.]

Adam initiated a hold rating and $69 price target for Penn National, which is only a few dollars more than the price at which the stock now trades. He noted the majority of the company’s revenue comes from its land-based casinos. Its sports betting app is also only live in one state.

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