DraftKings Lands Buy Rating in New Coverage by Goldman Sachs
Shares of DraftKings (NASDAQ: DKNG) gained 2.74% on a mixed twenty-four hours for gaming stocks after Emma Goldman Sachs issued a bullish phone call on the online sportsbook operator.
In a observe to clients on Tuesday, analyst Ben Miller tagged DraftKings with a “buy” rating and a $60 cost target, implying upside of 37% from the April 15 close. He expects DraftKings, which delivers first-quarter results on May 3, to proceed delivering substantive topline growth.
(We) look DraftKings to compound revenue at 20%+ as it continues to benefit from intelligent maturation in existing states, as fountainhead as time to come province legalizations crossways online sports betting & iGaming,” wrote Miller.
Recent data point DraftKings is adding online sports wagering market divvy up inward big states, including Michigan and Pennsylvania. The fellowship also possesses 1 of the to the highest degree worthful brands inward the industry, and its roving application program is among bettors’ favorites due to the operator’s investments inward technology. That presents DraftKings with substantial advantages o'er some littler rivals that are struggling to add together securities industry share.
DraftKings Stock Not as Expensive as Believed
While shares of DraftKings are higher past 65% over the past tense IX months, and 134.5% o'er the past times year, Henry Miller argues the stock is really trading at attractive multiples congenator to the manufacture and its possess historical averages.
“While the gillyflower is upward ~65% over the past 9 months, DKNG is trading at a maturation familiarized revenue multiple of 0.15x (vs. its historical mean(a) of 0.19x and peers currently trading at 0.17x), which is cut down ~20% over the same clip period,” wrote the analyst.
As is often the case with emerging ontogeny stocks next scorching runs to the upside, investors can place added emphasis on valuation. Conversely, valuation unaccompanied isn’t a intellect to buy or sell a stock, and if DraftKings keeps with its tradition of boosting earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance, it could live seen as progressively undervalued based on the math presented above.
“We view upside to Street revenue as estimates seem to live pricing in conservatism around some combination of existing country revenue gaming revenue (GGR) as % of PCE, new nation launches crossways online sports betting (OSB) & iGaming &/or DraftKings’ marketplace deal position,” added Miller.
Risks to DraftKings’ Bull Thesis
With the stock up on a scintillating pace to bulge out 2024, it’s enlighten DraftKings is proving resistant to at least i negatively charged scenario — that beingness disappointment on the new body politic legalisation front. With Georgia’s 2024 legislative session over, it appears no more states of take note testament supply sports betting or iGaming this year.
Miller noted that risks to the DraftKings upside thesis include sluggishness on the unexampled nation launch front, slack up ontogeny inward the operator’s time of origin states, and the possibleness of eroding market share. However, there’s currently little grounds indicating DraftKings is losing securities industry share.
On the legislative front, it’s possible for things to exchange for the better in Missouri, where a substantial bulk of voters okay of adding wandering sports wagering, but that appears to live a labored heave at the moment.
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