DraftKings is riding investor enthusiasm about the growth in online sports gambling to the second-highest market value in the U.S. gambling, behind only Las Vegas Sands, a longtime leader in the lucrative Macau casino market.

Wall Street is valuing DraftKings (ticker: DKNG) like an internet or cloud play at $9.9 billion, or about 14 times next year’s revenue of about $700 million. Morgan Stanley analyst Thomas Allen doesn’t see profitability until 2023, when he projects $1.4 billion in sales.

Las Vegas Sands (LVS) is valued at $34 billion while Wynn Resorts (WYNN) stands at $8.4 billion and MGM Resorts International (MGM) at $6.8 billion. Because of their debt, Wynn and MGM have larger enterprise values. DraftKings has about $450 million in cash and is burning $15 million to $20 million a month while major sports are on hold.

Even the virtual shutdown of professional sports world-wide has not fazed Wall Street. DraftKings’ stock gained $4, or 15%, on Friday to $29.23 in the wake of its first-quarter earnings report and gained another 32 cents, to $29.55, on Monday.

Investors like the company’s online business model, against that of capital-intensive traditional casinos that have been hard hit by Covid-19 closures, as well as social-distancing restrictions as they start to reopen. Younger gamblers like sports and are comfortable betting on their phones.

Analysts were impressed that the company’s first-quarter core DraftKings revenue was up 30%, to $89 million and showed a pre-Covid-19 year-over-year gain of 60%. The company’s results also include those of its SB Technology unit, which provides technology services to online betting companies.

Barron’s wrote favorably on the outlook for online sports gambling and DraftKings in a January cover story.

DraftKings is offering betting on table tennis, esports, and the coming charity golf match for coronavirus relief on Sunday between a team of Tiger Woods and Peyton Manning, who are the favorites, against a team of Phil Mickelson and Tom Brady.

“Who knew Fantasy Korean Baseball Was So Popular,” Morgan Stanley’s Allen wrote in a client note dated Sunday. DraftKings’ shift to “different forms of DFS (daily fantasy sports)/sports betting content (such as Korean baseball fantasy and esports sports book) suggest the near-term revenue declines will be less bad than we had previously thought,” Allen said. He sees revenue down 37% in the second quarter but rising 8% in the third quarter.

Like other analysts covering DraftKings, Allen struggles with its high valuation. He has an Overweight rating and price target of $25, which is below the current price, but he has bull case that supports a $75 price.

His $25 target is derived from a multiple of 18 on projected 2025 earnings before interest, taxes, depreciation, and amortization (Ebitda) of $648 million discounted back to now.

“We believe the market is going to rightfully value DraftKings more similar to high-growth internet stocks rather than EU online gaming stocks,” Allen wrote.

DraftKings has scarcity value as the only pure-play U.S. online sports gambling company. FanDuel is controlled by British betting giant Flutter Entertainment (PDYPF)

There are 14 states with about 24% of the U.S. population that have legalized online sports gambling, led by New Jersey and Pennsylvania. DraftKings and Fan Duel, which dominate fantasy sports, have leveraged those positions to leadership of the incipient online sports gambling market. New Jersey is the most important venue.

The industry sees opportunity because the four largest states by population—California, Texas, Florida, and New York—haven’t legalized online sports betting. State budget woes could accelerate the legalization drive.

DraftKings also is seeking to capitalize in the smaller but growing market for online casino games like slots, blackjack, and craps. New Jersey has become a leader in that market.

On the company’s first quarter conference call, CEO Jason Robins said: “We believe the combination of a large currently underserved market along with strong momentum on the legislative front provides the potential to create an environment of continuous category expansion for many years to come.”

Robins added that year he doesn’t “anticipate any impact to our FY20-21 or long-term plans as a result of Covid-19, assuming the sporting events calendar resumes to a normal state by 2021.”

The company’s shares have surged 68% since it effectively went public through a merger in late April with Diamond Eagle Acquisition, a special purpose acquisition company or SPAC. The stock has roughly tripled since it reached the deal with Diamond Eagle in late 2019.

Write to Andrew Bary at andrew.bary@barrons.com