DraftKings Earns Upgrade as Analyst Sees Attractive Earnings Potential

On what’s shaping upwards to follow a jolting daytime for equities, DraftKings (NASDAQ: DKNG) stock is standing out in prescribed fashion after an analyst upgraded shares of the sportsbook operator.

In a observe to clients on Tuesday, Argus psychoanalyst John Lackland Staszak lifted his rating on the gaming stock to “buy” from “hold” with a young toll mark of $22. That implies upside of 14.6% from the March 6 close.

Given DraftKings’ falling client acquisition costs and power to develop at 20% or higher over the next several years, we are confident in its long-term development prospects,” wrote Staszak.

His $22 price calculate on the gaming gunstock is beneath the Wall Street mediocre of $23.80 and at the depress remnant of the $13 to $38 reach held by analysts cover the stock. Of those analysts, 16 place DrafKings “buy” or “strong buy,” spell a dozen feature the combining weight of a “hold” rating on the shares, and trinity value it “sell.”

Argus Sees Revenue Growth with DraftKings

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

Staszak thinks the troupe tin can get along fifty-fifty better. The analyst is forecasting $3.1 billion inward 2023 sales, upward from $323 billion inward 2019. The psychoanalyst also cites improved client retention, securities industry portion gains, and increased profitability inwards jurisdictions in which the operator was established entering this year as possible catalysts for the stock.

The aforementioned 2023 guidance offered upwardly past DraftKings includes markets in which the company is currently operating and those inwards which it expects to go unrecorded at some head this year, such as Old Colony 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 legitimize online sports betting and consumers allocate more of their income to wagers, we look DKNG’s revenue to growth to $3.1 billion in 2023,” added the Argus analyst.

DraftKings’ Surprisingly Compelling Valuation

As an emerging growth company, DraftKings is seldom described as attractively valued. In fact, some analysts piddle the vitrine the gunstock is expensive. Staszak sees things differently.

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

Staszak believes that valuation crack is too wide, citing DraftKings’ declining customer acquisition costs and beguiling maturation outlook. The gaming companionship calculate the arriver of profitability in 2024, though some analysts believe it could materialise later this year.

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