DraftKings Lands Pair of Bullish Price Target Revision as Stock Experiences First Pullback
Posted on: June 3, 2020, 09:53h.
Last updated on: June 3, 2020, 10:18h.
Analysts just can’t seem to help themselves when it comes to DraftKings (NASDAQ:DKNG) stock. The company’s been public for about seven weeks and is already earning multiple price target revisions from Wall Street analysts.
On Wednesday, Canaccord Genuity analyst Michael Graham reiterated a “buy” rating on the daily fantasy sports (DFS) company and sportsbook operator, while lifting his price forecast on the name to $50 from $35. Susquehanna analyst Joseph Stauff joined the party, taking his estimate on DraftKings to $48 from $33. When Stauff initiated coverage on the stock three weeks ago, his $33 target was the highest at that time.
The analysts’ enthusiasm for DrafKings, which has more than doubled in value since its April 24 debut, comes as the stock encounters its first rough patch. On Tuesday, the shares retreated more than five percent, even as the broader market climbed, and at this writing Wednesday, the shares are lower by almost four percent.
Making the last couple of days price action in DraftKings potentially concerning is that the stock flirted with $45 yesterday and subsequently retreated below $40 today. Data indicates that some of the name’s surge is attributable to bearish traders covering short positions in the shares. But short covering isn’t a long-term catalyst for any equity.
Betting on Big States
DraftKings is currently operational in nine states, with online offerings in seven. But analysts see opportunity for the company to gain market share in some large states.
Stauff raised his target based on his estimates for 2022 because of the inclusion of NY OSB (New York online sports betting) starting March 2021, as well as multiple expansion on his revenue estimates,” according to The Fly. “He also noted new states will account for the company’s waves of growth, and he is now focused on other large states that will pull forward legalization.”
The company operates a brick-and-mortar sportsbook in Upstate New York, meaning it has the positioning and relationships necessary to grow in the Empire State as policymakers there allow for sports betting expansion.
DraftKings is also exploring avenues to enter Illinois more rapidly than initially expected. Sports betting in the Land of Lincoln is legal and operational, with some market observers saying the state could be the largest US sports wagering market within a year.
Graham, the Canaccord Genuity analyst, has the highest price forecast on DraftKings on Wall Street, and he sees investor enthusiasm building for the name.
He “noted the stock’s move despite the most barren period for live sports in the modern era. He believes investor excitement will continue with the return of live sports expanding its valuation and multiple,” according to The Fly.
The price targets revealed today by Graham and Stauff blow away the Wall Street consensus of $32.50. Goldman Sachs is the only research house covering DraftKings yet to increase its price estimate on the name, and it’s the only bank not rating the stock the equivalent of a “buy” or “strong buy.”