DraftKings Stock Price Target Upped, Analyst Sees Company Taking Share from FanDuel

Posted on: September 14, 2021, 10:27h. 

Last updated on: September 14, 2021, 02:36h.

DraftKings (NASDAQ:DKNG) stock is following other gaming equities lower today. But the sportsbook operator is on the receiving end of more support from the sell-side.

DraftKings stock
DraftKings stock highlighted at the Nasdaq market site, seen above. An analyst lifted his price target on the name today. (Image: Via News Agency)

In a note to clients today, Craig-Hallum analyst Ryan Sigdahl reiterates a “buy” rating on DraftKings, while boosting his price target on the stock to $70 from $60. That implies upside of almost 17 percent from current levels.

DraftKings’ all-time high is $74.38, which was set in late March. The Wall Street consensus price forecast on the name is $70.85.

DraftKings is the only pure-play sports betting name currently available in the US equity market — a trait long highlighted by bullish analysts. The stock is up nearly 30 percent year-to-date and 10.71 percent over the past month, with that recent ascent powered in large part by the arrival of football season.

Football Fantastic Catalyst for DraftKings Stock

Football is the most wagered-on sport in the US, and as such, the start of the 2021 season is fueling upside for sports betting equities.

Sigdahl, the Craig-Hallum analyst, says football wagering volumes are already topping “lofty” forecasts. Specific to DraftKings, the analyst sees that operator as best-positioned to benefit from football betting enthusiasm. He noted the company could steal market share from rival FanDuel this season.

FanDuel, a unit of Flutter Entertainment, is the largest online sportsbook operator in the US, while DraftKings is locked in an increasingly intense battle for the second spot with BetMGM.

Data confirms that football is indeed material for betting operators. The sport drives an estimated 35 percent to 40 percent of annual revenues for sportsbooks, with a third of those yearly sales arriving in the fourth quarter.

One point analysts and investors will surely be monitoring when third- and fourth-quarter earnings reports start rolling in is how much betting companies are spending on customer acquisition. It’s a relevant point, because some of the marquee names in the online wagering space aren’t yet profitable. That’s important for DraftKings investors, because the company may not turn profitable on the basis of earnings before interest, taxes, depreciation and amortization (EBITDA) until 2023 at the earliest.

Plenty of Enthusiasm for DraftKings Stock

Since becoming a standalone public company in April 2020, DraftKings became a Wall Street favorite, a fact that remains true today. Twenty-six analysts cover the company, 18 of which have bullish or very bullish ratings on the shares.

The operator is a consistent raiser of revenue guidance, and some analysts are already speculating that with a strong football handle, DraftKings could raise third-quarter and full-year sales estimates.

Much of investors’ enthusiasm for DraftKings revolves around increasing state-level legalization of internet casinos and sports betting. They also note the subsequent revenue boost that comes with a more hospitable revenue environment. Additionally, the company has a strong balance sheet and is showing a willingness to make acquisitions to expand its top line profile.