Truist Securities has adjusted its outlook on DraftKings Inc. (NASDAQ: NASDAQ:DKNG), reducing the price target from $53.00 to $50.00. The firm sustained its Buy rating on the stock.
Truist's commentary on Monday highlighted the company's recent earnings miss and guidance reduction but suggested that the estimates for the second half of the year may now be more conservative.
The analyst's remarks pointed to a keen interest in the industry's response to upcoming high-tax surcharges, specifically mentioning the anticipated reaction from FLTR™ during its earnings report on August 13, 2024.
DraftKings has contemplated the surcharge, which is set to begin on January 1, 2025, but the analyst indicated that there could be a strategic pivot if the approach proves detrimental.
Truist revised its projected EBITDA for 2024 downward by 16% to $380 million, which aligns with the company's new guidance range of $340 million to $420 million. The forecast for 2025 was also slightly reduced by 2% to $970 million, although this figure remains above DraftKings' reiterated midpoint target of $900 million to $1 billion.
The reduction in the price target to $50 is attributed mainly to a slightly higher discount rate applied by Truist Securities. Despite the adjustments,
DraftKings has reported significant growth in both customer acquisition and revenue. The company's recent quarterly report showed an impressive 80% increase in new Online Sports Betting (OSB) and iGaming customers year-over-year and a 26% rise in revenue, reaching $1.104 billion. Moreover, the company reduced its marketing costs by over 40% and announced a share repurchase program of up to $1 billion.
Stifel, an independent financial services company, adjusted its outlook on DraftKings, reducing the price target to $48 from the previous $50, but maintains a Buy rating. The adjustment came in response to changes in DraftKings' profit and loss dynamics, shifting from user retention strategies to focusing on user acquisition.
DraftKings also announced the smooth progression of the Jackpocket integration, expecting a positive adjusted EBITDA from the acquisition in fiscal year 2025. The company revised its EBITDA expectations for fiscal year 2024 to $340 million to $420 million, primarily due to an increase in the Sportsbook tax rate in Illinois.
InvestingPro Insights
As DraftKings Inc. (NASDAQ:DKNG) navigates through its financial journey, real-time data from InvestingPro offers a deeper dive into the company's current market position. With a market capitalization of $15.08 billion, DraftKings showcases a significant presence in the digital gaming sector. Analysts are tuning into the company's sales trajectory, anticipating sales growth in the current year, which aligns with Truist Securities' outlook for a strong second half. Additionally, the revenue growth has been robust, with a 43.26% increase over the last twelve months as of Q2 2024.
Despite recent earnings challenges, an InvestingPro Tip indicates that net income is expected to grow this year, providing a glimpse of optimism for the company's profitability prospects. Moreover, the company's stock price volatility, as seen in the recent 12.82% drop over the last week, suggests that investors may find opportunities in the fluctuations. For those keeping a close eye on valuation metrics, DraftKings is currently trading at a high Price/Book multiple of 11.58.
For investors seeking a comprehensive analysis, there are an additional 13 InvestingPro Tips available, offering insights that range from earnings revisions to stock performance over various time frames. DraftKings' next earnings date is slated for November 1, 2024, which will be a pivotal moment for investors to reassess the company's trajectory.
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