Editor's Note: Our Gaming, Lodging & Leisure (GLL) research team led by Todd Jordan and Sean Jenkins added DraftKings as a BEST IDEA LONG on September 29, 2022. Below is an excerpt from their original note announcing the addition. Shares of DraftKings have nearly quintupled the S&P 500 since then.

FLASHBACK | New Best Idea Long: DraftKings <abbr name='DraftKings Inc.'>DKNG</abbr> (9/29/22) - zz11

Excerpt below from 9/29/22:

TAKEAWAY: Adding as Best Idea Long ahead of our deep dive. We’ve been mostly on the short side but the data shows this big dog is learning new tricks.

HEDGEYE EDGE

The shorts may be barking up the wrong tree on this one.  If you like dog references, wait until you see our 2pm presentation.  Sorry, but we’re a team of dog lovers so it can’t be helped.  Anyway, while we wouldn’t quite call it a 180-degree turn – we’ve been more neutral on the online gaming space over the last few months – you might be surprised to learn that we are indeed positive on DKNG, at least for a trade. 

Our DKNG short calls were predicated on an obscene valuation coupled with negative catalysts such as declining market share and our forward looking scorecard metrics, technology and product issues, and an underappreciated length of the path to profitability for the industry in general, and specifically DKNG.  Well, if you’re still clinging to these negatives, we think you’re barking…

As we’ll show today, DKNG seems to be fixing its issues and the proof is in the pudding.  The DKNG brand is moving higher on our scorecard while reversing a little of its lost market share.  Moreover, we expect that investor sentiment is improving and should continue to do so.  Same state revenues are re-accelerating and the new state outlook is as bright as ever.  The promotional and external marketing environment looks a little less aggressive than last year with CZR scaling back and WYNN essentially pulling out.  DKNG over indexes to football so the timing is right for further sequential market share gains.  Think about how much higher revenues could be if its parlay progress continues – read: higher hold percentage – and that should be on the come as well.