On Monday, Stifel maintained a positive outlook on DraftKings Inc. (NASDAQ: NASDAQ:DKNG), raising the stock's price target to $51 from $50 while reiterating a Buy rating. The firm's analyst noted that despite the stock's decline on Friday, the company's performance met expectations. The results were in line with what investors anticipated, including both the unfavorable March hold impact and the upside to core value drivers. Additionally, the analyst's comments during the earnings call supported the thesis for upgrading the stock.
The report acknowledged that investors are currently weighing potential regulatory challenges, volatility in hold-rate, and possible customer resistance to high-hold bet types. Despite these concerns, Stifel sees a favorable outlook for DraftKings through the rest of 2024. The firm believes that the company's fundamentals are strong and there is still growth potential. Moreover, the cross-selling opportunities with Jackpocket are expected to significantly boost the company's performance.
Stifel also anticipates that DraftKings' capital allocation update, which is to be announced during the second-quarter earnings, could potentially include an initial return of capital to shareholders. The firm has increased its adjusted EBITDA estimates for 2024 and 2025 by 12% and 3%, respectively. This revision underpins the new price target of $51, which represents a $1 increase from the previous target.
InvestingPro Insights
Recent data from InvestingPro shows DraftKings Inc. (NASDAQ: DKNG) is trading with a high level of enthusiasm among analysts, despite its challenges. With a market capitalization of $19.92 billion and a notable revenue growth of 57.0% in the last twelve months as of Q1 2024, the company is demonstrating robust expansion. Analysts have highlighted that while the company operates with a moderate level of debt, it is expected to grow its net income and sales in the current year. This aligns with Stifel's positive outlook and the anticipation of capital allocation updates that could favor shareholders.
InvestingPro Tips suggest that, although DraftKings has not been profitable over the last twelve months, analysts predict the company will become profitable this year. Additionally, the company is trading at a high Price / Book multiple of 23.97, indicating a premium valuation by the market. For investors seeking more in-depth analysis and additional insights, InvestingPro offers further tips on DraftKings, which can be accessed with the exclusive coupon code for an additional 10% off a yearly or biyearly Pro and Pro+ subscription: PRONEWS24. There are currently 10 additional InvestingPro Tips available for DraftKings, providing a comprehensive look at the company's financial health and market potential.
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