DraftKings Analysts Cheer Strong Q4, Sports Betting Growth And SBTech Integration

DraftKings Inc DKNG received several price target raises after the strong fourth quarter reported on Friday.

The DraftKings Analysts: Canaccord Genuity analyst Michael Graham reiterates a Buy rating and raises the price target from $65 to $80.

Bank of America analyst Shaun C. Kelley reiterates a Neutral rating and raises the price target from $65 to $70.

Rosenblatt Securities analyst Bernie McTernan reiterates a Buy rating and raises the price target from $65 to $72.

Needham analyst Chris Pierce reiterates a Buy rating with a price target of $80.

Morgan Stanley analyst Thomas Allen reiterates an Overweight rating and raises the price target from $60 to $66.

Analysts On Earnings: DraftKings reported fourth-quarter revenue of $322 million, a 146% year-over-year increase, which beat the Street consensus estimate of $233 million.

“The strong Q4 caps off a blockbuster that saw the company meaningfully expand its geographic footprint and user base while strengthening its balance sheet,” Graham said.

Kelley points to more states legalizing sports betting and Canada launching sports betting as catalysts for the company.

See also: How to Buy DraftKings, Inc. (DKNG) Stock

“DraftKings gave the important data point that they reached positive contribution margin in NJ [New Jersey], highlighting the success based nature of this expenditure and we believe helps disprove a key bear element on the stock and industry,” McTernan said.

The performance of iGaming was strong in the fourth quarter and led to Allen reevaluating market share for the segment going forward. Allen is now projecting DraftKings will see iGaming market share of 18%, after a prior long-term outlook of 15%.

Related Link: FanDuel, DraftKings Take Early Lead In Michigan

SBTech Integration A Catalyst: As part of its SPAC merger, DraftKings acquired SBTech, a company that supports the back-end solutions for sports betting companies.

DraftKings will switch to using SBTech for its own platform after an existing deal with Kambi ends. This switch is set for September and after the outages seen from Kambi partners before the Super Bowl, McTernan points to more attention being put on the tech stacks for online sports betting providers.

McTernan calls the switch to SBTech a bullish factor on the improved financial impact for DraftKings. Pierce also mentioned the potential margin upside from the “lurking SBTech integration.”

“Perhaps most important will be the full integration of SBTech and the opportunities that should enable around product differentiation,” Graham said.

What’s Next: DraftKings raised its full-year guidance for fiscal 2021 to a range of $900 million to $1 billion. The previous guidance from the company was $750 million to $850 million.

“We think online sports betting in the U.S. is just getting started and DraftKings is cementing its position as a clear market with multiple opportunities for upside to guidance,” Graham said.

McTernan expects DraftKings to have access to 65% of the U.S. population by fiscal 2025, up from 25% at the end of fiscal 2020.

DKNG Price Action: Shares of DraftKings closed up 11.7% to $68.72 on Monday.

(Photo: Draft Kings)