DraftKings To Gain From Product Innovation & Competitive Differentiation, Analyst's Spot On Total Addressable Market Prospects

Benchmark analyst Mike Hickey reiterated the Buy rating on DraftKings Inc DKNG, raising the price target to $41 from $37.

The company's strategic focus on product innovation and competitive differentiation positions it well to capitalize on the significant TAM, which is expected to grow from $20 billion to approximately $30 billion by 2028, according to the analyst.

Drivers for this growth include rapid state-level adoption, technological advancements, and increasing user engagement.

This growth, along with DraftKings' efficient scaling and robust performance in existing states, indicates substantial opportunities for incremental growth and sustained revenue increases, the analyst adds.

The company's 2025 guidance projects revenue to be in the mid-$5 billion range, with AEBITDA estimated to be $900 million-$1 billion. 

The analyst notes that DKNG expects more U.S. states to legalize OSB and iGaming. 

By 2024, it plans to operate in 25 U.S. states and Puerto Rico, with iGaming in 5 states. 

The company is also tracking 8 additional states each for OSB and iGaming legislation., the analyst adds. 

DraftKings expects an increase in long-term Adjusted EBITDA by approximately $1.5 billion above its current state-based guidance. This could add up to $6.2 billion more in long-term annual Adjusted EBITDA, the analyst adds.

The analyst estimates FY24 revenue of $5.070 billion, using a 4x multiple, generates $37 EV value + net cash.

Price Action: DKNG shares are trading lower by 0.36% to $36.90 on the last check Wednesday.