DraftKings Inc DKNG analysts highlight the long-term outlook and opportunities after the company lowered fourth-quarter and full-year guidance Thursday.
- Benchmark analyst Mike Hickey reiterated a Buy rating with a $44 price target.
- Needham analyst Bernie McTernan reiterated a Buy rating with a $60 price target.
- Truist analyst Barry Jonas reiterated a Buy rating with a $50 price target.
- Bank of America analyst Shaun C. Kelley reiterated a Buy rating with a $50 price target.
Read Also: DraftKings Q3 Earnings Preview: NFL In Focus, Will Missouri Legalization Factor Into Guidance?
Benchmark: Fourth-quarter hold pressure shouldn't impact the long-term potential for DraftKings, Hickey said in a new investor note.
Favorable NFL outcomes from customers led to lower fourth-quarter and full-year guidance that the company is trying to offset with promotional optimizations and expense efficiencies, the analyst said.
"Our focus remains on FY 2025, anticipating growth driven by product enhancements, increased structural hold, and U.S. market expansion," Hickey said.
DraftKings is forecasting growth in gross margins, stable operating costs and strong customer acquisition and retention, the analyst added.
Hickey highlighted that initial fiscal 2025 guidance does not include mobile sports betting launches planned for Missouri and Puerto Rico, which could offer additional upside.
Needham: Third-quarter results and fourth-quarter guidance revisions were expected, McTernan said in a new investor note.
"More importantly in our view, DKNG reiterated '25 guidance of $900M to $1B, and introduced ~30% revenue guidance at the midpoint," McTernan said.
The analyst said the lower fourth-quarter guidance could now be a catalyst "moving to the rearview mirror," which would allow more focus on the 2025 guidance.
DraftKings reported new customers were up 14% year-over-year in the third quarter.
"We are encouraged by the continued growth and shows less of a benefit from new state launches."
Truist: Third-quarter EBITDA was more favorable than analysts predicted and could show that DraftKings' core business is healthy, Jonas said.
The fourth-quarter guidance could be overshadowed by 2025 guidance, Jonas added.
"We continue to believe in DKNG's underlying business and standing in Interactive, not overly discouraged by the worse than expected 2024 guide-down," Jonas said.
The analyst also said the fourth-quarter results could surprise and the new guidance could be conservative with lots of NFL weeks left that could offset the positive customer-friendly outcomes.
Bank of America: While the fourth quarter could be good for DraftKings customers thanks to NFL outcomes, Kelley sees a good 2025 for investors.
"For 2025, we think DKNG's revenue and EBITDA guidance met the buyside bar and implied flow-throughs of 39% are in-line with FanDuel," Kelley said.
The analyst said DraftKings' flow-through guidance could be achievable even if customer acquisition is tough and could prove conservative if the sports betting company has favorable sports outcomes.
Price Action: DraftKings stock is up 5% to $41.02 on Friday versus a 52-week trading range of $28.69 to $49.57. DraftKings stock is up 22% year-to-date in 2024.
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