On Wednesday, Needham reiterated its Buy rating on DraftKings Inc. (NASDAQ:DKNG) stock with a steady price target of $60.00. The endorsement came after an investor dinner with DraftKings' new CFO, Alan Ellingson, which marked his first investor-facing event, and Michael DeLalio from Investor Relations.
The discussion highlighted DraftKings' strategy to focus on live betting for the upcoming NFL season and addressed the company's recent pivot on the high tax rate surcharge.
The conversation with DraftKings' executives also touched on the company's performance in the second quarter, noting a significant 80% increase in first-time depositors coupled with a 40% reduction in customer acquisition costs (CAC). Additionally, the dialogue covered the current regulatory landscape and competitive environment, which is perceived to remain benign.
Most notably, Needham suggested that DraftKings might follow in the footsteps of Flutter Entertainment to mitigate the impact of the higher Illinois tax. While DraftKings has not confirmed such a move, Needham anticipates that adopting similar measures could present a less risky path to achieving higher estimates for 2025.
The reaffirmed Buy rating and price target reflect Needham's positive outlook on DraftKings' strategic initiatives and potential for growth, despite the challenges posed by regulatory changes and market competition. DraftKings' stock continues to be watched closely by investors as the company navigates the evolving landscape of the online betting industry.
In other recent news, DraftKings has been the focus of numerous analyst adjustments in response to its recent earnings and revenue results, as well as other company developments.
Truist Securities maintained its Buy rating on DraftKings, despite the company retracting its planned operational surcharges due to competitive pressures. This decision was seen as a response to market dynamics and customer feedback.
Morgan Stanley, on the other hand, reduced its price target for DraftKings to $47.00 while maintaining an Overweight rating. This adjustment followed DraftKings' Q2 performance and full-year 2024 EBITDA guidance, which fell short of expectations due to increased costs associated with acquiring more customers.
Truist Securities also reduced its price target from $53.00 to $50.00 for DraftKings, highlighting the company's recent earnings miss and guidance reduction. Truist's revised projections for 2024 and 2025 EBITDA align with the company's new guidance.
Oppenheimer lowered its stock price target for DraftKings to $55.00 but kept an Outperform rating. This adjustment followed DraftKings' announcement of a reduced EBITDA outlook for 2024, attributed to higher customer acquisition costs.
Lastly, Stifel adjusted its outlook on DraftKings, reducing the price target to $48 while still affirming a Buy rating. This adjustment followed concerns over user acquisition costs and promotional activities potentially affecting the company's adjusted EBITDA for fiscal year 2024.
All these changes come as DraftKings navigates competitive pressures, customer acquisition costs, and changes in the online betting industry. Despite these challenges, the company continues to report significant growth in customer acquisition and revenue.
InvestingPro Insights
As DraftKings Inc. (NASDAQ:DKNG) garners a positive outlook from Needham, with strategic moves aimed at enhancing live betting experiences and managing costs, it's insightful to look at the company's financial health and market performance through the lens of InvestingPro. The company's market cap stands at a robust $15.2 billion, reflecting investor confidence. Despite not being profitable over the last twelve months, analysts are predicting profitability this year, aligning with the company's ambitious growth targets. This optimism is underpinned by a hefty revenue growth rate of 43.26% in the last twelve months as of Q2 2024, showcasing DraftKings' expanding market presence.
InvestingPro Tips highlight the expected growth in net income and sales for the current year, which may be pivotal for investors considering the stock's recent volatility and price declines. Over the last six months, the stock has taken a significant hit, yet there remains a strong return over the last five years. With moderate debt levels and no dividends paid to shareholders, DraftKings' financial strategy appears focused on reinvestment and expansion.
To gain further insights into DraftKings' financial trajectory and access additional InvestingPro Tips, investors can explore the comprehensive analytics available on InvestingPro. Currently, there are 13 additional tips listed for DraftKings on InvestingPro, providing a deeper dive into the company's financials and market potential.
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