On Friday, Stifel reiterated its Buy rating on DraftKings Inc. (NASDAQ: NASDAQ:DKNG) with a steady price target of $50.00. The firm's stance remains positive despite a 15% decline in the company's shares over the trailing two-month period, a downturn attributed to factors such as the Illinois tax increase and recent downward adjustments to the company's second quarter and full-year 2024 EBITDA estimates.
According to the firm, the legislative and budget discussions expected for the rest of the calendar year 2024 are likely to offer limited new catalysts until 2025. This forecasted quiet period could shift investor attention back to DraftKings' free cash flow (FCF) inflection. The firm views the headwinds faced by DraftKings, including the Illinois tax hike and the impact of Jackpocket, as largely accounted for following the latest consensus revisions.
The firm also notes that recent state-reported gross gaming revenue (GGR) trends indicate robust core growth drivers that may surpass the reset expectations of the buy-side. Furthermore, DraftKings' upcoming update on capital allocation, which is anticipated to include an initial return of capital, is seen as a sign of confidence in future FCF generation.
Despite the headwinds and a slight 1% reduction in the 2024 EBITDA estimate, Stifel encourages investors to maintain their positions in DraftKings ahead of the company's second-quarter earnings report. The firm's analysis suggests that the setup for the second half of 2024 is favorable, making the stock a recommended hold into the upcoming earnings announcement.
In other recent news, DraftKings Inc. has seen several adjustments in its stock targets by various analyst firms. Oppenheimer lowered its price target from $60 to $58, maintaining an Outperform rating, following a reassessment of the company's second-quarter and full-year 2024 EBITDA estimates.
Guggenheim also adjusted its price target for DraftKings to $52.00 from $53.00, while maintaining a Buy rating. Deutsche Bank (ETR:DBKGn) reiterated a Hold rating on DraftKings shares with a target of $35, citing regulatory risks and a potential shortfall in 2Q24 earnings.
Moreover, Erik Bradbury has returned to DraftKings as its Chief Accounting Officer, marked by a significant restricted stock unit award. Morgan Stanley (NYSE:MS) has reaffirmed its positive stance on DraftKings, maintaining an Overweight rating and a $51.00 price target, reinstating it as their Top Pick in the North American Gaming & Lodging sector.
Susquehanna International Group maintained a positive rating but lowered its shares target to $49 from $56, reflecting stronger than anticipated industry growth and the recent acquisition of JackPocket.
Lastly, BMO Capital maintained an Outperform rating and a stock price target of $54.00 for DraftKings, showing confidence in the company's long-term prospects despite potential challenges from new tax legislation in Illinois.
InvestingPro Insights
In light of Stifel's reaffirmation of a Buy rating on DraftKings Inc. (NASDAQ: DKNG), real-time data from InvestingPro provides additional context to the company's financial landscape. With a striking market capitalization of $18.14 billion, DraftKings showcases substantial growth potential, underscored by a remarkable 57.0% increase in revenue over the last twelve months as of Q1 2024. This impressive revenue growth is complemented by a gross profit of $1590.23 million, indicating a solid gross profit margin of 39.06%.
InvestingPro Tips highlight that analysts expect net income growth and sales expansion in the current year for DraftKings. These projections are particularly relevant as they align with Stifel's positive outlook on the company's core growth drivers and future free cash flow generation. Moreover, while the stock has experienced significant volatility and a notable 20.68% price drop over the past three months, analysts remain optimistic about DraftKings' profitability in the year ahead.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available that could provide further insights into DraftKings' financial health and stock performance. Utilize the coupon code PRONEWS24 to receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to these valuable tips.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.