DraftKings Stock Has Upside To Street Estimates, Analyst Says: Sports Betting Play Will 'Benefit From Healthy Growth'

DraftKings Inc DKNG has a new bull on Wall Street that’s taken notice of the growing total addressable market size of the sports betting sector.

The DraftKings Analyst: Goldman Sachs analyst Ben Miller initiated coverage on DraftKings with a Buy rating with a $60 price target.

The DraftKings Takeaways: Strong unit economics and growing profitability for DraftKings are among the highlights Miller covered in a note.

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"We expect DraftKings to compound revenue at 20%+ as it continues to benefit from healthy growth in existing states, as well as future state legalizations across OSB & iGaming," Miller said.

The Boston-based company could have upside to Street revenue and EBITDA targets as unit economics improve, Miller says.

"We see upside to Street revenue as estimates appear to be pricing in conservatism around some combination of existing state GGR as % of PCE, new state launches across OSB & iGaming &/or DraftKings' market share position,” he added.

Miller sees DraftKings growing revenue at a compounded annual rate of 21% from 2023 to 2028. The analyst has a target of $7 billion for 2026 and $9.4 billion in 2028.

Miller said DraftKings can achieve 20%+ adjusted EBITDA margins by 2026, with positive adjusted EBITDA and free cash flow in 2024 on a full-year basis.

DraftKings shares are up around 65% over the last nine months, Miller notes. The stock still trades at a 0.15x growth adjusted revenue multiple, which is below its historical average (0.19x) and peers (0.17x), Miller notes.

Risks for the DraftKings thesis include potential slower-than-anticipated new state launches, lower growth in existing states, and a decline in the market share for the company.

DKNG Price Action: DraftKings shares are up 1% to $44.20 on Tuesday versus a 52-week trading range of $19.73 to $49.57. Shares of DraftKings are up 124% over the last year.

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