DraftKings Inventory Hammered as Three Analysts Minimize Worth Targets


Posted on: Could 10, 2021, 07:43h. 

Final up to date on: Could 10, 2021, 01:24h.

DraftKings (NASDAQ:DKNG) inventory is extending what’s now a precipitous decline, as not less than three analysts at present trimmed worth forecasts on the sportsbook operator.

DraftKings price target
The opening of the DraftKings sportsbook at Del Lago On line casino in New York. The inventory is sliding at present as three analysts scale back worth targets. (Picture: Auburnpub.com)

In early buying and selling Monday, shares of the every day fantasy sports activities (DFS) supplier are off greater than six p.c after stumbling 14.54 p.c final week and 20.77 p.c over the previous month. DraftKings is off 38 p.c from its 52-week excessive notched in March, and all that bloodletting seems to be inspiring analysts to lower cost estimates on the identify.

Morgan Stanley analyst Thomas Allen lower his DraftKings worth goal to $63 from $66, however reiterated an “outperform” ranking on the inventory whereas providing up some bullish feedback.

Income considerably outperformed our expectations, and 2021 income steering was properly forward (once more), however administration guided to larger earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) losses this yr and can situation considerably extra stock-based comp than we anticipated,” stated Allen.

Final week, Boston-based DraftKings reported a narrower-than-expected first-quarter loss on income that beat the consensus forecast whereas boosting its 2021 income steering.

Allen sees DraftKings commanding 25 p.c of the sports activities betting market and 18 p.c of the iGaming phase. His $63 goal is a base case situation and in an excessive bear case, the inventory might plunge to $11. Nevertheless, his bull case forecast is $182 — almost quadruple the place the shares reside at present.

Lack of Profitability Catching Up with DraftKings Inventory

DraftKings grew to become a standalone public firm in April 2020, and in that point, there have been lingering issues concerning the operator’s buyer acquisition prices and runway to profitability.

Probably the most optimistic forecasts point out the gaming firm will stop dropping cash someday in 2022. However some analysts imagine the EBITDA losses gained’t cease till the next yr. Needham analyst Bernie McTernan lower his worth estimate on DraftKings to $73 from $81 simply two weeks after his authentic forecast was revealed.

He cited widening EBITDA losses and the broader market’s choice for worth shares over progress fare as the explanation for the discount. However he nonetheless charges DraftKings a “purchase” and is enthusiastic on the corporate’s plans to combine social media into its sports activities betting platform, which might create an enviable community impact.

Craig-Hallum analyst Ryan Sigdahl pared his goal on DraftKings inventory to $60 from $70. He nonetheless charges the identify a “purchase” and says “aggressive” spending will repay over the long run, because the operator emerges as one of many leaders in a market prone to be dominated by a small variety of gamers.

In Protection of DraftKings

Some analysts are sticking by the beleaguered gaming fairness. Cowen analyst Stephen Glagola raised income estimates on DraftKings whereas noting the corporate’s steering for the second half of this yr might show conservative.

Canaccord Genuity’s Michael Graham additionally raised income estimates whereas sustaining an $80 forecast on DraftKings.

“We’re inspired by the favorable trade backdrop, as on-line sports activities betting legalization progress has accelerated throughout the nation, and quite a few current strategic partnerships and acquisitions are serving to DraftKings develop its media technique and improve its product providing,” stated the analyst in a notice to purchasers.

“Regardless of a aggressive market, these components give us confidence that important top-line progress will persist because the US embraces on-line sports activities betting,” the notice continued.

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