On Monday, Susquehanna reaffirmed its confidence in DraftKings Inc. (NASDAQ: NASDAQ:DKNG), raising the stock's price target to $50 from the previous $48 while maintaining a Positive rating. The firm's analyst cited several factors contributing to the optimistic outlook for the third quarter of 2024, including a "likely" higher mix of parlay betting, stronger-than-anticipated user growth, and a favorable calendar shift.
Specifically, the shift resulted in 15 more NFL games compared to the same quarter in the previous year, which is projected to increase gross gaming revenue (GGR) by 3% to 4%.
The analyst believes that the third-quarter revenue and EBITDA loss estimates of $1.05 billion and $80 million, respectively, are secure and not at risk. The potential upside to these estimates is underpinned by the positive trends observed in the current quarter. DraftKings' performance is set to be further scrutinized with the first check on September data expected by the end of this week.
The upgrade in the price target comes as a result of the company's competitive set trading higher. This adjustment reflects the broader market's valuation of comparable companies and suggests an improved market sentiment toward the sector in which DraftKings operates.
Susquehanna's stance on DraftKings remains unchanged despite the new price target, indicating a steady belief in the company's strategy and market position. The firm's projections for the third quarter are based on data and trends observed in the current quarter, which seem to support a robust performance for DraftKings.
In other recent news, DraftKings Inc. has been a focal point for investors due to several significant developments. The sports betting company recently agreed to pay a $200,000 penalty to the U.S. Securities and Exchange Commission (SEC) over charges of failure to disclose material non-public information equitably to all investors.
On the financial front, DraftKings reported a substantial 80% increase in new online sports betting and iGaming customers year-over-year, with a 26% rise in revenue, reaching a total of $1.104 billion. The company also managed to cut its marketing costs by over 40% and announced a share repurchase program of up to $1 billion.
In the realm of analyst assessments, JPMorgan lifted its price target for DraftKings to $54 from the previous $48, maintaining an Overweight rating. Needham, on the other hand, maintained its Buy rating and $60.00 stock price target for DraftKings, despite a revision in the company's adjusted EBITDA projections for the years 2025 and 2026. Morgan Stanley also maintained an Overweight rating for DraftKings, indicating a 30% upside, despite a less than stellar performance in the second quarter.
Lastly, DraftKings maintained its Buy rating and $60.00 price target from Needham following promising sportsbook outcomes and strategic acquisitions, including the acquisition of Simplebet, which is expected to enhance its in-game betting offerings.
InvestingPro Insights
To complement Susquehanna's optimistic outlook on DraftKings Inc. (NASDAQ: DKNG), recent data from InvestingPro provides additional context for investors. The company's market capitalization stands at $19.07 billion, reflecting its significant presence in the sports betting industry. DraftKings has demonstrated impressive revenue growth, with a 43.26% increase over the last twelve months as of Q2 2024, and a 26.23% quarterly growth in Q2 2024. This aligns with Susquehanna's expectations of strong user growth and increased betting activity.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, which supports the firm's positive revenue projections. Moreover, the tip indicating that net income is expected to grow this year corroborates Susquehanna's confidence in DraftKings' financial performance.
It is worth noting that DraftKings operates with a moderate level of debt, which could provide financial flexibility as it continues to expand. However, investors should be aware that the stock's price movements are quite volatile, which may require careful consideration in portfolio management.
For those seeking a deeper analysis, InvestingPro offers 11 additional tips for DraftKings, providing a more comprehensive view of the company's financial health and market position.
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