DraftKings Favored By Analyst In Competitive Sports Betting Sector: 'The King Isn't Giving Up Its Crown'

The sports betting sector could see competition increase with the expansion of Fanatics and the launch of ESPN Bet.

One analyst highlights the strength in the financials of DraftKings Inc DKNG in the highly competitive space.

The DraftKings Analyst: Bank of America analyst Shaun C. Kelley has a Buy rating on DraftKings and a price target of $45.

Related Link: DraftKings Q3 Earnings Highlights: Shares Climb On Revenue, EPS Beat; Company Raises 2023 Guidance, Provides Initial 2024 Guidance

The Analyst Takeaways: Ahead of fourth-quarter earnings from DraftKings, Kelley is raising estimates for the company's next two fiscal years.

Kelley now sees DraftKings posting revenue of $4.72 billion in fiscal 2024, up from a previous estimate of $4.67 billion. The analyst sees revenue hitting $5.54 billion in fiscal 2025, up from a previous estimate of $5.50 billion.

"Expecting a Q4 beat, and potentially a 2024 guidance raise," Kelley said.

The analyst said investor sentiment on DraftKings could have been negative given increased competition from PENN Entertainment Inc PENN with its launch of ESPN Bet and the strength of the BetMGM platform from MGM Resorts International MGM and Entain.

"We expect +55% Y/Y NGR (net gaming revenue) in Q4 vs. +60% in Q3, driven by the strength in online sports betting and company-specific market share gains for DraftKings."

The analyst said DraftKings could raise 2024 guidance during its fourth-quarter financial results, after originally predicting a range of $4.5 billion to $4.8 billion.

"DKNG could reflect their underlying strength by raising the low-end predicted on 30% blended iGaming/OSB share vs. 32% in Q4 and faster-than-expected TAM expansion."

DraftKings will report fourth-quarter financial results on Feb. 15. Analysts expect the company to report earnings per share of 9 cents and revenue of $1.241 billion according to data from Benzinga Pro. The company has beaten earnings per share estimates from analysts in seven straight quarters and revenue estimates in eight straight quarters.

DKNG Price Action: DraftKings shares are up 1.64% to $39.10 on Monday versus a 52-week trading range of $14.51 to $40.19. Shares of DraftKings are up 160% over the past year.

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