Posted on: March 7, 2023, 01:07h.
Final up to date on: March 7, 2023, 01:07h.
On what’s shaping as much as be a tough day for equities, DraftKings (NASDAQ: DKNG) inventory is standing out in constructive vogue after an analyst upgraded shares of the sportsbook operator.
In a be aware to shoppers at this time, Argus analyst John Staszak lifted his ranking on the gaming inventory to “purchase” from “maintain” with a brand new worth goal of $22. That suggests upside of 14.6% from the March 6 shut.
Given DraftKings’ falling buyer acquisition prices and skill to develop at 20% or increased over the subsequent a number of years, we’re assured in its long-term progress prospects,” wrote Staszak.
His $22 worth forecast on the gaming inventory is beneath the Wall Road common of $23.80 and on the decrease finish of the $13 to $38 vary held by analysts overlaying the inventory. Of these analysts, 16 price DrafKings “purchase” or “sturdy purchase” whereas a dozen have the equal of a “maintain” ranking on the shares and three price it “promote.”
Argus Sees Income Development with DraftKings
Final month, Boston-based DraftKings boosted the midpoint of its 2023 income outlook to $2.95 billion from $2.9 billion whereas boosting the midpoint of its projected adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA) loss to $400 million from $525 million.
Staszak thinks the corporate can do even higher. The analyst is forecasting $3.1 billion in 2023 gross sales, up from $323 million in 2019. The analyst additionally cites improved buyer retention, market share positive aspects and elevated profitability in jurisdictions wherein the operator was established getting into this yr as potential catalysts for the inventory.
The aforementioned 2023 steerage supplied up by DraftKings consists of markets wherein the corporate is at the moment working and people wherein it expects to go reside sooner or later this yr, comparable to Massachusetts and Puerto Rico.
The corporate’s product portfolio, together with iGaming, improved expertise and same-game parlays (SGPs), can also be seen as a tailwind.
“As extra states legalize on-line sports activities betting and customers allocate extra of their revenue to wagers, we count on DKNG’s income to extend to $3.1 billion in 2023,” added the Argus analyst.
DraftKings Surprisingly Compelling Valuation
As an rising progress firm, DraftKings isn’t described as attractively valued. The truth is, some analysts make the case the inventory is pricey. Staszak sees issues in a different way.
The analyst notes DraftKings trades at a worth/gross sales a number of of three.6X in contrast with 7x for a basket of high-growth tech shares, together with beforehand beloved names comparable to Peloton Interactive, Shopify, Teladoc and Zoom Video.
Staszak believes that valuation hole is just too broad, citing DraftKings’ declining buyer acquisition prices and alluring progress outlook. The gaming firm forecast the arrival of profitability in 2024, although some analysts imagine it may occur later this yr.