DraftKings Earns Upgrade as Analyst Sees Attractive Earnings Potential

On what’s defining upwardly to live a bumpy twenty-four hours for equities, DraftKings (NASDAQ: DKNG) gillyflower is standing out inward a positive degree forge after an psychoanalyst upgraded shares of the sportsbook operator.

In a take note to clients on Tuesday, Argus psychoanalyst John the Divine Staszak lifted his rating on the gaming gunstock to “buy” from “hold” with a young terms target of $22. That implies upside of 14.6% from the March 6 close.

Given DraftKings’ falling customer acquisition costs and ability to grow at 20% or higher o'er the next several years, we are confident in its long-term ontogeny prospects,” wrote Staszak.

His $22 price calculate on the gaming gunstock is to a lower place the Wall Street mediocre of $23.80 and at the lour terminate of the $13 to $38 chain of mountains held past analysts cover the stock. Of those analysts, 16 charge per unit DrafKings “buy” or “strong buy,” spell a dozen get the equivalent of a “hold” rating on the shares, and leash grade it “sell.”

Argus Sees Revenue Growth with DraftKings

Last month, Boston-based DraftKings boosted the midpoint of its 2023 revenue outlook to $2.95 1000000000000 from $2.9 one million million patch boosting the midpoint of its projected adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) red ink to $400 meg from $525 million.

Staszak thinks the troupe canful fare fifty-fifty better. The analyst forecasts $3.1 1000000000000 in 2023 sales, upwards from $323 1000000 inwards 2019. The analyst also cites improved customer retention, marketplace divvy up gains, and increased profitability inwards jurisdictions where the operator was established entering this twelvemonth as possible catalysts for the stock.

The aforementioned 2023 direction offered up by DraftKings includes markets inwards which the fellowship is currently operating and those in which it expects to spell live at some pointedness this year, such as Bay State and Puerto Rico.

The company’s mathematical product portfolio, including iGaming, improved technology, and same-game parlays (SGPs), is also seen as a tailwind.

“As additional states legitimatise online sports betting and consumers allocate to a greater extent of their income to wagers, we anticipate DKNG’s revenue to increase to $3.1 one thousand million inwards 2023,” added the Argus analyst.

DraftKings’ Surprisingly Compelling Valuation

As an rising growing company, DraftKings is seldom described as attractively valued. Some analysts pass water the caseful the gunstock is expensive. Staszak sees things differently.

The analyst notes DraftKings trades at a price/sales multiple of 3.6X compared with 7x for a basketful of high-growth tech stocks, including antecedently dear names such as Peloton Interactive, Shopify, Teladoc, and Zoom Video.

Staszak believes the valuation gap is too wide, citing DraftKings’ declining client acquisition costs and tempting development outlook. The gaming company forecast the comer of profitability inward 2024, though some analysts believe it could come about later this year.

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