DKNG is a good long-term buy; current low valuation (11x fwd P/E) and price (~$18.59) reflect excessive pessimism despite high risk.

DraftKings has finally begun to gain momentum in the forecasting markets. Initially, this was a major obstacle for the company, but it now has over one million customers interacting with its prediction market products.

By the end of the NFL season, the management team expects the number of these customers interacting with the prediction markets' activities this year to reach several million. This is interesting because Draft Kings had a superior market entry strategy compared to many of its competitors, but then came the launch of forecast markets and the current management's lenient attitude towards forecast market companies entering the market.

Draft Kings views this situation with optimism and tells investors: "Look, we win either way." If this type of regulatory environment remains in place, where the situation resembles the "Wild West" and you can bet on anything at any time with these companies without having to go through a regulatory process to obtain approval to make these types of bets available, then Draft Kings can offer these products; Because its products are superior, it can gain market share as it already does.

On the other hand, Draft Kings told investors that if the regulatory environment changes, which often happens depending on who is in office and who sets the policies, and if we move towards a more restrictive regulatory environment where prediction market operators are no longer allowed to operate in the states, Draft Kings is still a winner because it already has an excellent strategy for gaining access to markets in individual states for sports betting and, to a lesser extent, for online gaming (iGaming).

So, in both cases, Draft Kings has positioned itself to be a winner in this gaming category. For this reason, investors are curious about this stock.

So, I wanted to delve a little deeper to answer whether I think it's a buying opportunity right now. I mentioned that this was initially a hurdle, as Draft Kings had to adapt to these policy changes that led to increased competition.

So, its revenues have declined slightly, haven't they? For years, Draft Kings has been on an upward trajectory: gaining market share, increasing revenue, expanding into new states and new jurisdictions, and with a superior product, gaining even greater value.

Because let's be realistic, the value proposition for the customer is much better if you can bet online or through an app instead of having to drive to a local casino to make those bets.

Thus, once Draft Kings obtains regulatory approval in a particular jurisdiction, it almost immediately gains a substantial market share, thanks of course to awareness marketing that attracts customers.

But the launch of competitors' forecast markets put an end to that, and the company's revenues fell somewhat to 6.22 billion, and it took time for Draft Kings to adapt.

Management now feels confident that they will gain millions of new customers thanks to these new products, the prospects markets products, and that they are able to get back on track for their growth.

However, management also stated that it is currently increasing its marketing investments because it sees a very favorable environment and a very encouraging return on this marketing expenditure.

The efficiency that enables them to add new customers gives the company's management team the encouragement to spend more on marketing, doesn't it? As a marketer, if you work in this field, you know the equation.

It is the long-term value of the customer compared to the cost of acquiring the customer. If you feel that this equation is favorable, you expand upon it. You are pumping more money into that category.

This is what Draft Kings is noticing at the moment.

The current acquisition cost environment is highly profitable compared to the long-term value they see in the customers they attract.

Therefore, management said that the money they plan to spend in 2027 on marketing, they will put part of it forward to 2026 while conditions are favorable. But investors are not impressed. Investors are worried.

Draft Kings' valuation has never been cheaper than it is now. The stock is currently trading at a forward price-to-earnings ratio of only 11. Only 11. So, this is an indicator of a company that is expected to remain stable or grow at very low rates in the long term.

Therefore, investor expectations for Draft Kings are very low. The feelings surrounding "Draft Kings" are extremely negative. Similarly, when I evaluated the company using the discounted cash flow model, I came to a similar conclusion.

You were expecting that because the stock is trading near its 52-week low of $18.59. The lowest level in 52 weeks was actually $18.52. So, in my opinion, I think this is a great opportunity for long-term investors.

However, this situation is extremely risky. The competition has become fiercer than ever for "Draft Kings".

She has to compete in a different way than she is used to. She has to adapt in a way she didn't expect. All of this increases the risk, and I have adjusted that in my assessment profile by increasing the beta coefficient I use for the company, because I see it as riskier when looking at the next three to five years compared to the risk when looking at the past three to five years.

So, I adjusted my risk assessment to be higher, but even after that, the stock still looks very attractive. This should only be taken into account by investors with a high risk tolerance, but if you have a higher risk tolerance and are looking for higher returns, I think DraftKings represents an excellent opportunity here.