JPMorgan Upgrades DraftKings Stock Rating
After a decline that extends back to July, DraftKings (NASDAQ: DKNG) stock climbed on Tuesday thanks to favorable remarks from JPMorgan.
In a communication to clients, analyst Joseph Greff upgraded the online betting service provider from "neutral" to "overweight" and bumped up his estimate for the lagging shares to $37 from $26. This new projection indicates an increase of 35% from the September 25 closing price, while DraftKings is situated 19.31% below its 52-week max, established on August 4.
According to Greff's, "We're capitalizing on sluggish share price activity since late July." (Sports wagering) features appealing market conditions, with enticing same-store and new territory growth prospects, set against a backdrop of improving business expenditure regulation within the sector.
Greff's $37 projection on DraftKings, which is slightly beyond consensus, derives from estimations of $1.2 billion in projected 2026 EBITDA and an assumed $3 billion in end-of-the-year funds for DraftKings. The current level of short interest in the stock is 5.4%, a notably high amount, which makes it feasible for a further surge in the shares to motivate those with bearish positions to rationalize their trades.
Stimulus for DraftKings' Stock
Despite recent declines, DraftKings has experienced a banner year in the gaming scene, surging 144.29% since the start of 2023.
Momentum exists for shares to rebound and potentially attain Greff's price objective. Factors contributing to these ricochet include a less costly operation setting, DraftKings' own drive to better manage costs, and less reliance on new domains to promote sales.
"DKNG's advantage stems from an increase in market share due to higher hold rates (propelled by parlay mix and a focus on risk/trading management), better customer loyalty (resulting from brand familiarity, credibility, and product upgrades)," remarked Greff. "Customer acquisition expenses can descend as the company amasses a grand scale, and sales/marketing costs dwindle noticeably, thus boosting flow-through and triggering speedy EBITDA margin expansion."
Although not addressed by Greff, DraftKings holds other revenue streams that might not be fully appreciated in the financial community. These include DraftKings Marketplace and Reignmakers, a fantasy sports-centered game integrating NFTs.
Establishing a Fixed Fortress for DraftKings
A frequently-encountered term in Corporate America to describe a business's competitive advantages is "wide moat," which emphasizes a firm's ability to maintain competition away and its power to retain customers by discouraging them from defecting to a rival.
While the entrance hurdles into the sports wagering marketplace aren't too high, and the domestic sports wagering business is essentially a duopoly dominated by FanDuel and DraftKings, the company has constructed a desirable moat that's enabled it to fend off Fanatics and Penn National Gaming (NASDAQ: PENN) with ESPN Bet – who are endeavoring to encroach on FanDuel and DraftKings' duopoly.
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Source: www.casino.org
