U.S. stocks finished mostly higher with the Nasdaq Composite leading the way, gaining 2.58% during the week. As measured by Russell indexes, growth stocks outperformed value shares for the second week this year. The best-performing concepts are Casinos & gaming stocks.
Considering the different perceptions of the stock, this time TigerPicks chose $DraftKings Inc.(DKNG)$ to have a fundamental highlight to help users understand it better.
$DraftKings Inc.(DKNG)$
DraftKings Inc. is a digital sports entertainment and gaming company. The Company provides users with online sports betting (Sportsbook), online casino (iGaming) and daily fantasy sports (DFS) product offerings, as well as retail sportsbook, media and other consumer product offerings.
The Company is also involved in the design and development of sports betting and casino gaming software for online and retail sportsbooks and iGaming operators. Its daily fantasy sports product is available in 44 states, certain Canadian provinces, and the United Kingdom.
For the most part, this earnings season, big momentum names have continued to extend their recent wins. DraftKings, the most recognizable brand in sports betting, is one of the beneficiaries of this trend: the company achieved a significant "beat and raise" in the fourth quarter that delivered a swift ~15% boost to its share price.
Tailwinds
DraftKings sits on top of many tailwinds: additional states legalizing sports gambling, a growing casino/iGaming business, and economies of scale that are driving better hold percentages on its sportsbook. But we have to ask ourselves: after such a fierce rise over the past year, does DraftKings really have more room to shoot higher?
I now see a relatively more balanced bull-and-bear case for DraftKings at current share prices. On the bright side for this company:
- DraftKings still has a broad population in the U.S. that is still pending legalization. Currently, DraftKings only operates in states that represent 49% of the U.S. population (major holdouts include the state of California). As more states look to legalize sports gambling and add to their tax revenue, DraftKings could stand to benefit.
- Growing appeal of one-time events. The company noted record wagers on the Tyson/Paul boxing match in November. Netflix (NFLX) has signaled its interest in producing more of these live events, and many of its streaming competitors could follow suit. A greater number of these highly publicized specials could drive even more activity to DraftKings' betting platform.
At the same time, however, I'm wary of the following risks:
- Volatile trends. In two out of four quarters in FY24, the company blamed poor profit performance (and lowered its annual adjusted EBITDA guidance) due to unfavorable sports outcomes. These are unpredictable and highly likely to recur.
- Can the company hit its guidance? DraftKings expects to quintuple its adjusted EBITDA in FY25, which is a very lofty goal, even considering the company's ~30%+ revenue growth expectations (more in the next section).
All in all, especially after the recent run-up, I don't see much room for DraftKings to run higher. Continue to watch this stock, but don't rush to buy.
Stock Price Forecast:
Here are the target price forecasts for the next 12 months from analysts.
Based on 27 Wall Street analysts offering 12 month price targets for DraftKings in the last 3 months. The average price target is $53.47 with a high forecast of $62.00 and a low forecast of $36.00. The average price target represents a -0.04% change from the last price of $53.49.
Resource:
https://seekingalpha.com/article/4758802-draftkings-incredible-customer-acquisition-terrible-price-rating-upgrade
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