DraftKings Inventory Stumbles On Lukewarm Morgan Stanley Name


Posted on: November 2, 2021, 09:51h. 

Final up to date on: November 2, 2021, 11:56h.

DraftKings (NASDAQ:DKNG) inventory is tumbling Tuesday after Morgan Stanley resumed protection of the web sportsbook operator with a lukewarm evaluation.

DraftKings stock
DraftKings’ headquarters, pictured above. Its inventory was hit onerous by a Morgan Stanley name. The financial institution charges the shares “equal-weight.” (Picture: In search of Alpha)

In a observe to shoppers as we speak, analyst Thomas Allen restarts protection of DraftKings with an “equal-weight” grade and a worth goal of $53. That’s implying upside of about 10 % from the Nov. 1 shut.

We resume protection of DKNG at EW with a $53 worth goal. We enhance our complete US sports activities betting/iGaming TAM (complete addressable market), however imagine we’re comparatively in step with consensus. Therefore, we see the important thing near-term driver for the inventory as market share and indicators of long-term profitability, the place we see each near-term upside & draw back dangers,” mentioned Allen.

DraftKings at present isn’t worthwhile, and considerations about when that can change have been on buyers’ minds for a while. Consensus knowledge holds that the corporate will flip worthwhile on earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) foundation round 2023. However there are dissenting voices, with not less than one analyst saying that received’t occur till 2025.

Morgan Stanley Nonetheless Bullish on iGaming, Sports activities Wagering

Regardless of the tepid commentary on DraftKings inventory, Morgan Stanley stays enthusiastic on the broader iGaming and sports activities wagering industries.

The financial institution boosts its 2025 income forecast for these segments to $18 billion from $16 billion to account for the current legalization of on-line sports activities wagering in Florida — the third-largest state — and North Carolina. Nevertheless, the financial institution acknowledges that estimate is affected by Texas — the second-largest state — not being included.

For now, sports activities wagering in Florida seems as if it’ll largely be managed by the Seminole Tribe, which owns Onerous Rock Worldwide. It’s additionally attainable that if California voters approve sports activities betting in November 2022, that state’s tribal gaming operators will dominate the panorama, and it is going to be three years earlier than on-line betting is allowed. Morgan Stanley sees encouraging indicators for operators in different states, nevertheless.

“It’s clear that the US will probably see unprecedented ranges of iGaming spend/capita,” mentioned Allen, highlighting momentum in Michigan, New Jersey, and Pennsylvania.

DraftKings Inventory Dinged One other Approach

In a minor case of including insult to harm, although not deliberately, Morgan Stanley restarts protection of Entain Plc (OTC:GMVHY) with an “obese” score. That’s a extra compelling endorsement than it provides to DraftKings.

DraftKings beforehand pursued Entain in what would have been the sports activities wagering business’s largest takeover on file.  However the two events introduced final week the talks have ended.

Morgan Stanley analyst Ed Younger highlights Entain’s engaging inorganic and natural development alternatives whereas noting DraftKings’ run on the Ladbrokes proprietor underscores excessive shortage worth. Entain is a 50/50 companion with MGM Resorts Worldwide (NYSE:MGM) on the BetMGM enterprise.

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