DraftKings Analysts Fawning for Stock, Multiple Price Target Hikes Arrive Today

Posted on: May 18, 2020, 09:58h. 

Last updated on: May 18, 2020, 10:56h.

Still a few days shy of its one-month anniversary as a public company, DraftKings (NASDAQ:DKNG) is in the enviable position of not only enjoying a bullish consensus on Wall Street, but already earning multiple sell-side price forecast hikes as well.

DraftKings Earns Analyst Price Target Rises
Wall Street’s affinity for DraftKings stock continues today with three price target hikes. (Image: Wall Street Journal)

On Monday, DraftKings stock earned three bullish price estimate revisions following last Friday’s earnings report, the company’s first since its April 24 initial public offering. The increases come after Canaccord Genuity analyst Michael Graham did the same last week. Graham initiated coverage of the sportsbook operator’s stock on May 5 with a “buy” rating and a $25 price target, the latter of which was boosted to $35 last Friday.

One of the more notable actions on DraftKings stock today comes courtesy of Craig-Hallum analyst Ryan Sigdahl. In reiterating a “buy” on the shares, the analyst lifted his price forecast on the name to $35 on from $30. That after he boosted that target to $30 from $25 on May 14.

Given the combination of massive industry tailwinds, impressive executive team, and scarcity value as the only vertically integrated pure-play on the proliferation of online gambling in the US, the analyst thinks a $9B valuation still underappreciates the long-term value of the company,” according to The Fly.

Sigdahl, who was one of the first analysts to cover DraftKings, evaluating it when it was Diamond Eagle Acquisition Corp. – the vehicle used to facilitate the IPO – sees a runway for the company to generate $4 billion in revenue and $1 billion in earnings before interest, taxes, depreciation and amortization (EBITDA) over the next decade.

Other Price Estimate Boosts

Another big increase to DraftKings price estimates was delivered by Northland Capital analyst Greg Gibas. In reiterating a “buy” rating on the stock, Gibas boosts his price forecast to $33, just two weeks after launching evaluation of the name with a $24 call.

Morgan Stanley’s Thomas Allen revealed a more measured increase to his DraftKings price outlook, lifting it to $25 from $23.

With today’s increases, the consensus price target on DraftKings is up to $32.60 from $24 just a couple of weeks ago. The stock is trading higher by 2.12 percent at this writing, residing at $29.85, but that’s well off the intraday high of $31.78.

What’s Driving the Ebullience

Much of Wall Street’s and investors’ fondness for DraftKings equity is attributable to robust growth estimates for the US sports betting market. But the company’s still modest foray into iGaming, or online casinos could prove meaningful over the long-term.

Earlier this month, the company won an iGaming permit from the Pennsylvania Gaming Control Board (PGCB), which is relevant to investors because online casino revenue is soaring in the Keystone State.

With land-based gaming properties shuttered by the coronavirus, gamblers are going online with Pennsylvania data confirming as much. Today, the PGCB said iGaming revenue surged 74 percent in April on a month-over-month basis.