Zinger Key Points
- 5 analysts react to the earnings report and updated guidance from DraftKings.
- Competition is sized up by analysts with recent market share gains.
Shares of sports betting and iGaming operator DraftKings Inc DKNG are trading higher after the company reported second quarter financial results Thursday after market close. Here’s a look at what analysts are saying after the report.
The DraftKings Analysts: Roth MKM analyst Edward Engel has a Sell rating and a price target of $20.
JMP Securities analyst Jordan Bender has a Market Outperform rating and a price target of $33.
Susquehanna analyst Joseph Stauff has a Positive rating and a price target of $39.
Morgan Stanley analyst Stephen Grambling has an Overweight rating and a price target of $32.
Needham analyst Bernie McTernan has a Buy rating and a price target of $36.
Roth on DraftKings: A beat for earnings by DraftKings came from a lack of competition and “lucky win rates,” according to Engel.
“Market share gains have been a catalyst in 2023, particularly with CZR and PENN pulling back marketing early last year,” Engel said. “In 2H23, these smaller operators are targeting another marketing push alongside revamped products.”
The analyst also sees the launch from Fanatics leading to downside for DraftKings shares.
JMP on DraftKings: The sports betting company has seen “impressive” market share gains, according to Bender.
The analyst said DraftKings saw higher market share and an increase in paying users, while also seeing more revenue fall to the bottom line.
“The operational excellence, higher structural hold and lucky outcomes had a direct positive impact to results,” Bender said.
The analyst said adjusted EBITDA guidance could have likely been higher if Kentucky launched sports betting in 2024 and not in September 2023.
Susquehanna on DraftKings: Revenue and EBITDA results from DraftKings in the second quarter were much stronger than expected, Stauff said.
“2Q user growth was an impressive +44% yoy,” Stauff said.
The analyst highlighted key factors going forward including third quarter spending and competition, new products and structural hold.
Related Link: Exclusive: DraftKings CEO Jason Robins Says Sports Betting Platform Differentiates Itself By Analyzing The Customer
Morgan Stanley on DraftKings: Momentum for DraftKings results and stock price gains could continue, according to Grambling.
“The company is not only proving out the economics of sports betting and iGaming but also widening its competitive gap,” Grambling said. “We also expect the path to positive profits to surface the company’s billion plus NOL carryforward not reflected in valuation.”
Needham on DraftKings: The sports betting company “significantly” outperformed expectations for a third straight quarter, according to McTernan.
“DKNG beat the elevated expectations heading into the quarter with better than expected revenue and adj. EBITDA driving a positive revision to their ’23E guide primarily driven by stronger customer retention and engagement,” McTernan said.
The analyst noted that older states are seeing strong results from DraftKings with revenue growth and margin expansion.
DKNG Price Action: DraftKings shares are up 4.25% to $31.26 on Friday at the time of publication, having dropped slightly after hitting 52-week highs.
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