DraftKings' Shares Soar as Experts Raise Price Estimates
After a sudden decrease in stock price on Friday due to strong first-quarter earnings, DraftKings (NASDAQ: DKNG) has bounced back Monday with multiple analysts raising their targets on the gaming company. With increased trading volume, DraftKings saw a 5.38% increase to kick off the week. While Macquarie analyst Chad Beynon didn't increase his price goal, he maintained an "outperform" rating and $54 objective for the stock, implying almost a 22.7% increase from today's closing price. He explained that DraftKings is making progress with costs and having impressive free cash flow characteristics. The analyst also emphasized that the company remains a significant player (approximately 30%) in a growing market. Even though there are no immediate risks to DKNG's 15-30% multi-year growth rate, he comments that its data analytical skills will be beneficial in additional markets.
Last week, DraftKings released an unanticipated non-GAAP profit for the first quarter, increasing the midpoint of their 2024 EBITDA and revenue guidance.
Promising Outlook for DraftKings Stock
Being able to contain costs and prove profitability, DraftKings has been among the highest-performing gaming stocks since January. This allows DraftKings to be seen as undervalued compared to other emerging growth companies.
Stifel analyst Jeffrey Stantial, who believes the situation is promising for DraftKings stock, mentioned three reasons why 2024 looks positive: 1) healthy fundamentals, 2) potential impact from cross-selling between DraftKings and Jackpocket, and 3) possible capital return announcement by the company during the earnings call for the second quarter. Raising his price target to $51 from $50, Stantial kept his "buy" rating on the stock. While he didn't specify if buybacks or dividends were more probable for the investor return, he did note that there's potential for one of these actions.
DraftKings' Successful Cross-Selling Strategy
DraftKings has a track record of introducing new offerings to their customers, successfully transitioning many daily fantasy sports (DFS) users to online sports betting and promoting iGaming to sports bettors in the five regions where it offers DFS.
Stantial thinks that DraftKings will experience similar benefits when it comes to cross-selling with online lottery provider Jackpocket, which DraftKings bought for $750 million back in February.
“I see signs of growth persisting at least until the end of 2024," said Stantial in a report. "There's also the upside with management's ability to leverage an appealing and unexplored cross-sell opportunity with Jackpocket."
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Source: www.casino.org
