DraftKings Inc DKNG analyst sees areas of opportunity for the sports betting company to surprise with financial guidance in third-quarter earnings as the company competes with FanDuel for market share in the sports betting sector.
The DraftKings Analyst: Bank of America analyst Shaun C. Kelley reiterated a Buy rating on DraftKings with a $50 price target in a new investor note.
The DraftKings Takeaways: DraftKings’ third-quarter report could provide an updated look at full-year guidance and future 2025 financials, Kelley said.
"We expect top-line growth in the fourth quarter to come in slightly below guidance driven by unfavorable hold and challenging iGaming comps," the analyst said.
The second-half revenue flowthrough could be better than expected and protect EBITDA for fiscal 2024, he said. The analyst also sees revenue expansion for DraftKings with hold expansion "keeping up with FanDuel's +100bps/year" and lower promotional spending activity.
Concerns for DraftKings include slower app downloads and unfavorable NFL game outcomes, Kelley added.
"We think DKNG will call out the unfavorable NFL outcomes, and we incorporate this into fourth-quarter estimates."
With nine more NFL weekends left in the current fourth quarter, the analyst said the unfavorable outcomes in several weeks could still be offset.
The analyst said DraftKings's 2025 guidance could be one of the top areas to watch when the company reports third-quarter financial results on Nov. 7.
"We expect DKNG to reiterate their FY25 EBITDA guide of $900M-$1B, and provide initial revenue guidance of $6.15-$6.45 billion representing ~25% Y/Y growth from our 2024 estimates and a 45% revenue to EBITDA flow through."
DKNG Price Action: DraftKings stock closed Monday at $36.56 versus a 52-week trading range of $26.35 to $49.57. DraftKings stock is up 9% year-to-date.
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