Shares of DraftKings (NASDAQ: DKNG) gained 2.74% on a mixed mean solar day for gaming stocks after Goldman Sachs issued a bullish phone call on the online sportsbook operator.
In a annotation to clients on Tuesday, analyst Ben Henry Miller tagged DraftKings with a “buy” rating and a $60 terms target, implying upside of 37% from the April 15 close. He expects DraftKings, which delivers first-quarter results on May 3, to continue delivering material topline growth.
(We) anticipate DraftKings to chemical compound revenue at 20%+ as it continues to benefit from healthy ontogeny inwards existing states, as well as hereafter land legalizations crosswise online sports betting & iGaming,” wrote Miller.
Recent information point DraftKings is adding online sports wagering market percentage inwards large states, including Michigan and Pennsylvania. The keep company also possesses ane of the to the highest degree valuable brands inward the industry, and its mobile covering is among bettors’ favorites due to the operator’s investments inward technology. That presents DraftKings with substantial advantages over some smaller rivals that are struggling to add marketplace share.
DraftKings Stock Not as Expensive as Believed
While shares of DraftKings are higher by 65% o'er the past nine months, and 134.5% over the past year, Henry Miller argues the stockpile is really trading at attractive multiples congenator to the industry and its own historical averages.
“While the buy in is upward ~65% o'er the past 9 months, DKNG is trading at a growing adjusted revenue multiple of 0.15x (vs. its historical ordinary of 0.19x and peers currently trading at 0.17x), which is push down ~20% o'er the same time period,” wrote the analyst.
As is often the slip with emerging development stocks followers scorching runs to the upside, investors canful place added emphasis on valuation. Conversely, valuation unaccompanied isn’t a understanding to purchase or sell a stock, and if DraftKings keeps with its tradition of boosting earnings before interest, taxes, depreciation, and amortisation (EBITDA) guidance, it could live seen as more and more undervalued based on the math presented above.
“We insure upside to Street revenue as estimates come along to live pricing inwards conservativism around some combining of existing res publica revenue gaming revenue (GGR) as % of PCE, new say launches crosswise online sports betting (OSB) & iGaming &/or DraftKings’ market portion position,” added Miller.
Risks to DraftKings’ Bull Thesis
With the gunstock on a scintillating stride to starting 2024, it’s solve DraftKings is proving resistant to at least unity disconfirming scenario — that existence letdown on the young tell legalisation front. With Georgia’s 2024 legislative session over, it appears no more states of mention testament supply sports betting or iGaming this year.
Miller noted that risks to the DraftKings upside thesis include sluggishness on the new nation set in motion front, slake growing inwards the operator’s time of origin states, and the possibility of eroding market share. However, there’s currently little grounds indicating DraftKings is losing market share.
On the legislative front, it’s possible for things to alteration for the break in Missouri, where a important majority of voters O.K. of adding mobile sports wagering, but that appears to live a heavy rise at the moment.
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