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Posted on: February 25, 2021, 12:11h.
Final up to date on: February 25, 2021, 01:34h.
Todd Shriber Learn Extra
Forward of its fourth-quarter earnings report scheduled for Friday morning, DraftKings (NASDAQ:DKNG) inventory is following the broader market decrease right this moment. However a one-day slide isn’t stopping some on Wall Road from waxing bullish on the sportsbook operator.
The DraftKings sportsbook on the Mardi Gras on line casino in Colorado. An analyst is bullish on the title forward of Friday’s earnings report. (Picture: 9News.com)
In a notice to purchasers, Macquarie gaming analyst Chad Beynon reiterates an “outperform” score on the inventory, whereas rising his value goal to $68 from $64. That suggests upside of about 13 p.c from the place the shares closed on Feb. 24.
As our high choose in on-line gaming, we proceed to imagine that DKNG has all the appropriate instruments (to maintain) its place as clear high two participant — robust model, pristine stability sheet, proprietary tech, information science and retention instruments, league/crew sponsorships and media partnerships,” mentioned Beynon.
The analyst forecasts long-term market share of roughly 20 p.c for DraftKings, trailing solely rival and FanDuel guardian Flutter Leisure Plc (OTC:PDYPY).
For the December quarter, analysts count on DraftKings will publish a lack of 49 cents a share on income of $232.04 million. Over the previous 90 days, 4 analysts lowered earnings forecasts, whereas seven elevated gross sales estimates.
What Might Transfer DraftKings Inventory
Wall Road is broadly optimistic on DraftKings, with 18 of the 27 analysts protecting the title anointing it very bullish or bullish scores, in comparison with only one “promote” name.
Nonetheless, with break-even earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) not anticipated to reach till subsequent yr, and profitability unlikely to be seen earlier than 2023, DraftKings must hit on another key metrics, particularly including market share.
Analysis agency Eilers & Krejcik Gaming estimates that on-line on line casino markets in New Jersey and Pennsylvania will account for 34 p.c of the corporate’s fourth-quarter gross gaming income (GGR). The agency additionally forecasts that 17 p.c of GGR might be attributable to New Jersey sports activities wagering and that 12 p.c might be derived from Illinois sports activities wagering. Which means DraftKings is outperforming in that state relative to its positioning in Indiana and Pennsylvania. These markets have been stay for an extended time-frame.
DraftKings is operational in 14 states, representing nearly a 3rd of the US inhabitants. Beynon, the Macquarie analyst, says the trade ought to add one other 15 p.c of the inhabitants over the course of this yr and 2022.
With no earnings as of but and buying and selling at 50.90x gross sales and 11.84x e book worth, DraftKings is valued as a progress inventory, which it’s.
That additionally means it must ship on or exceed progress expectations. It simply may have the ability to try this. Beynon is forecasting a 34 p.c compound annual progress price for the corporate’s income over the subsequent six years.
As income will increase, market and basic and administrative bills as a share of gross sales will decline. Relating to profitability, persistence is required. However the DraftKings timeline compares favorably with web giants Amazon and Twitter. Beynon notes it took these firms six and 5 years, respectively, after preliminary public choices (IPOs) to stop dropping cash.
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