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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 Avenue 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 identify forward of Friday’s earnings report. (Picture: 9News.com)
In a observe to shoppers, Macquarie gaming analyst Chad Beynon reiterates an “outperform” score on the inventory, whereas growing 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 prime choose in on-line gaming, we proceed to imagine that DKNG has all the fitting instruments (to maintain) its place as clear prime two participant — sturdy model, pristine stability sheet, proprietary tech, knowledge science and retention instruments, league/workforce 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 mum or dad Flutter Leisure Plc (OTC:PDYPY).
For the December quarter, analysts anticipate DraftKings will submit 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 May Transfer DraftKings Inventory
Wall Avenue is broadly constructive on DraftKings, with 18 of the 27 analysts overlaying the identify 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 12 months, and profitability unlikely to be seen earlier than 2023, DraftKings must hit on another key metrics, specifically 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 will likely be attributable to New Jersey sports activities wagering and that 12 p.c will likely be derived from Illinois sports activities wagering. Meaning DraftKings is outperforming in that state relative to its positioning in Indiana and Pennsylvania. These markets have been dwell for an extended timeframe.
DraftKings is operational in 14 states, representing nearly a 3rd of the US inhabitants. Beynon, the Macquarie analyst, says the business ought to add one other 15 p.c of the inhabitants over the course of this 12 months and 2022.
With no earnings as of but and buying and selling at 50.90x gross sales and 11.84x ebook 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 do this. Beynon is forecasting a 34 p.c compound annual progress charge for the corporate’s income over the subsequent six years.
As income will increase, market and normal and administrative bills as a proportion of gross sales will decline. Concerning profitability, endurance 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 shedding cash.
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