DraftKings Stock Draws JPMorgan Upgrade
Following a slouch that dates rearwards to July, DraftKings (NASDAQ: DKNG) stockpile rallied on Tues with the facilitate of bullish commentary from JPMorgan.
In a take note to clients today, analyst Chief Joseph Greff upgraded the online sportsbook manipulator to “overweight” from “neutral” spell boosting his terms target area on the of late downtrodden shares to $37 from $26. That young calculate implies an upside of 35% from the September 25 come together and arrived as DraftKings is off 19.31% from its 52-week high, printed on August 4.
We are taking advantage of sluggish portion out price execution since tardily July,” wrote Greff. (Sports betting) is an appealing sector, with attractive same-store and new marketplace development prospects, against the backcloth of an industry-wide up operating write off contain environment.”
Greff’s $37 price direct on DraftKings, which is more or less supra consensus, is based on 15x the operator’s expected 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.2 billion and estimated year-end immediate payment of $3 one million million inward 2026. Current myopic stake inward the stock up is 5.4%, richly enough that a novel rally inwards the shares could compel bearish traders to overcompensate those losing bets.
Catalysts Abound for DraftKings Stock
Even with the recent pullback, DraftKings inventory has been a 2023 lead inward the gaming industry, surging 144.29% since the head start of the year.
Catalysts are inward shoes for the shares to rebound and, potentially, gain Greff’s price target. Those sparks include a normalizing cost environment, DraftKings’ possess emphasis on meliorate managing expenditures, and a decreasing dependance on new markets to driving top-line growth.
“DKNG stands to do good from a continued increase inwards securities industry share from higher sustain rates (driven by parlay unify and amend risk/ trading) and improved trueness (from firebrand recognition, trust, and product enhancements),” added the JPMorgan analyst. “Customer acquisition costs tin continue declining as national exfoliation is achieved and sales/marketing costs pass precipitously. These transform to improve flow-through and rapid Earnings Before Interest Taxes Depreciation and Amortization perimeter expansion.”
Though non mentioned by Greff, DraftKings has other revenue-generating avenues that likely aren’t full comprehended past the investment biotic community yet. Those include DraftKings Marketplace and Reignmakers, a fantasy sports spirited rooted inward nonfungible tokens (NFTs).
DraftKings Establishing a Moat
“Wide moat” is a phrase ofttimes bandied nearly inward Corporate America to depict a company’s competitory advantages. Put simply, it highlights a firm’s ability to hold on competitors from stealing securities industry share and/or its ability to retain customers past making switching to a competitor unappealing.
While barriers to ledger entry in the sports wagering manufacture are relatively low-pitched and there are dozens of competitors inwards the US, the domestic sports betting blank is essentially a duopoly controlled past FanDuel and DraftKings.
As noted past Greff, DraftKings has built an enviable fosse that’s allowed it to ward away a viable competitor inwards Caesars Sportsbook. That status is all the to a greater extent important at a clip when Fanatics and William Penn Entertainment (NASDAQ: PENN) with ESPN Bet are looking to challenge the FanDuel/DraftKings duopoly.
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