Draftkings Receives Strong Buy Rating as Jefferies Raises Price Target

Jefferies's David Katz raised their price target on Draftkings (NASDAQ: DKNG) by 3.8% from $52 to $54 on May 6, 2024. The analyst maintained their Strong Buy rating on the stock.

In their research note, Katz expressed optimism about Draftkings' first quarter earnings report, stating that the results "firmly support our thesis that the acceleration in top- and bottom-line execution will bring increased profit and cash flows sooner than expected." Katz also highlighted that analysts' estimates on Draftkings are likely to continue moving higher.

Draftkings reported impressive results for the first quarter of 2024. The company exceeded expectations with an EPS of $0.03, beating both the Zacks Consensus Estimate of $(0.28) and the EPS of $(0.51) from the same quarter in 2023. Additionally, Draftkings reported revenue of $1.18 billion, surpassing the Zacks Consensus Estimate by 4.40% and showing a significant increase of 53% compared to Q1 2023's revenue of $769.65 million. The company's EBITDA for the quarter reached $22.39 million.

Looking ahead, Draftkings' management provided optimistic guidance for fiscal year 2024. They expect revenue to range between $4.8 billion and $5.0 billion, up from the previous guidance of $4.65 billion to $4.90 billion. Additionally, Draftkings anticipates EBITDA to fall between $460 million and $540 million, an increase from the earlier guidance of $410 million to $510 million.

Draftkings' Co-founder and CEO, Jason Robins, expressed satisfaction with the company's performance in the first quarter. Robins highlighted the healthy revenue growth and the company's ability to maintain a scaled fixed cost structure, which positions them for improved Adjusted EBITDA. Robins also emphasized Draftkings' commitment to maximizing shareholder value through innovation, operational excellence, and disciplined capital allocation.

CFO Alan Ellingson added that Draftkings expects the Adjusted EBITDA Flow-through Percentage for fiscal year 2024 to exceed 50%. This projection is based on the company's plans to expand its gross margin, exercise cost structure discipline, and invest in promotions and marketing in line with their LTV to CAC (Lifetime Value to Customer Acquisition Cost) targets.

In addition to Jefferies' David Katz, other analysts also updated their ratings and price targets for Draftkings on May 6, 2024. Deutsche Bank's Carlo Santarelli raised their price target by 2.9% from $34 to $35 while maintaining a Hold rating on the stock. Stifel Nicolaus's Jeffrey Stantial raised their price target by 2% from $50 to $51 and maintained a Strong Buy rating. Barclays's Brandt Montour increased their price target by 3.8% from $52 to $54 and also maintained a Strong Buy rating.

According to data from WallStreetZen, 93.8% of top-rated analysts currently rate DKNG as a Strong Buy or Buy. Only 6.3% consider it a Hold, and no analysts recommend or strongly recommend selling the stock.

Since Draftkings' latest quarterly report on May 2, 2024, the stock price has increased by 2.4%. Year-over-year, the stock has shown significant growth of 82.3%. During this period, Draftkings has outpaced the performance of the S&P 500, which has grown by 25.2%.

Draftkings Inc. is a digital sports entertainment and gaming company. The company operates in 17 countries, providing multi-channel sports betting and gaming technologies. Draftkings offers its iGaming services through its brand in five states and operates Golden Nugget Online Gaming in three states. The company's Sportsbook is live with mobile and retail betting operations in 18 states. Draftkings also offers a daily fantasy sports product in six countries and 15 distinct sports categories. Additionally, the company owns Vegas Sports Information Network (VSiN), a broadcast and content company. Draftkings Inc. was founded in 2011 and is headquartered in Boston, Massachusetts.

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