On Friday, DraftKings Inc. (NASDAQ:DKNG) stock received an upgrade in its rating from Hold to Buy by CFRA. The firm has maintained a 12-month price target for the company at $42.00, citing several factors for the positive outlook.
The analyst at CFRA highlighted DraftKings' strong financial position and innovative platform as key drivers for the upgrade. The price target is based on 4.1 times the firm’s 2024 revenue estimate, which is slightly higher than the peer average of 3.7 times. The analyst also reiterated the earnings per share (EPS) estimates for 2024 and 2025 at $0.25 and $0.50, respectively.
DraftKings recently reported a second-quarter normalized EPS of $0.22, surpassing the $0.14 figure from the same quarter last year and beating consensus estimates by $0.03.
The company's revenues were $1.1 billion, which, while $11 million below estimates, marked a significant increase from $790 million in the prior year. The number of Monthly Unique Players surged by 50% year-over-year to 3.1 million, and the Average Revenue Per User grew by 15% to $115.
In light of these results, DraftKings has raised its full-year revenue expectations to $5.15 billion, up from the previously guided $4.90 billion. However, the company has also revised its adjusted EBITDA guidance downward from $500 million to $380 million at the midpoint.
The CFRA analyst also noted DraftKings' recent expansion into Washington D.C. in July and the anticipated launch in Puerto Rico. Despite a 20% decline from recent highs, the analyst sees potential upside in DraftKings shares, as the company continues to dominate the mobile gaming industry in the U.S. and maintains a robust balance sheet.
InvestingPro Insights
Following the upgrade of DraftKings Inc. (NASDAQ:DKNG) by CFRA, real-time data and insights from InvestingPro provide additional context for investors considering the company's stock. DraftKings' market capitalization stands at $15.2 billion, reflecting the size and scale of its operations within the gaming industry. The company's significant revenue growth, reported at 57% for the last twelve months as of Q1 2024, underscores the strong performance that has likely contributed to CFRA's positive outlook.
InvestingPro Tips indicate that while analysts expect net income and sales growth in the current year, DraftKings is not profitable over the last twelve months, and there is a noted volatility in the stock price movements. The company is trading at a high Price / Book multiple of 20.7, which may suggest a premium valuation compared to its tangible assets. Despite this, the company's robust revenue growth and the anticipation of profitability this year could be driving factors for investor optimism. For those interested in a deeper analysis, there are additional tips available on InvestingPro, providing further insights into DraftKings' financial health and market position.
These metrics and insights from InvestingPro can help investors make more informed decisions by understanding the potential risks and opportunities associated with DraftKings' stock. With additional tips accessible through the InvestingPro platform, investors have the resources to explore the company's prospects in greater detail.
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