DraftKings Inc
The DraftKings Analysts:
- Macquarie analyst Chad Beynon maintained an Outperform rating on DraftKings and raised the price target from $50 to $60.
- Needham analyst Bernie McTernan reiterated a Buy rating and raised the price target from $60 to $65.
"We view DKNG as the best large-cap way to play the US online market given its first-mover advantage, strong brand recognition with younger demographics, and superior tech," Beynon said.
The analyst said the strong financials and future results could be powered by lower promotional activity and continued operating leverage.
DraftKings had 37% year-over-year growth for monthly unique payers in the fourth quarter, which Beynon said shows strong acquisition and engagement.
"Double-digit industry growth combined with higher hold and lower promos should drive significant operating leverage in the coming years."
Beynon said DraftKings improving its hold rate, having lower promotional activity and seeing additional state legalizations could be catalysts for 2025.
"We believe the company, which has transitioned to profitability, is well positioned for double-digit revenue growth."
Needham on DKNG: DraftKings stock climbing to new 52-week highs on Friday was a move that shows investor optimism for 2025, McTernan said in a new note.
"Coming out of earnings we are incrementally more bullish on the company hitting these targets as OSB handle trends accelerated in 1Q and sport outcome has been positive QTD," McTernan said.
The analyst said DraftKings hitting 2025 guidance could put the company on a "strong trajectory" to double adjusted EBITDA by 2027.
The analyst said the earnings report helped show positives as investors have been focused on structural hold and handle trends.
"We walked away from earnings incrementally more positive on both."
McTernan said quarterly handle growth dropped due to fewer NFL Sundays in the quarter and the 2024 presidential election "grabbing mind share." The analyst expects DraftKings handle to grow 21% year-over-year in fiscal 2025.
For hold, DraftKings and other sportsbooks suffered from NFL favorites winning 75% of games in 10 weeks during the 2024 season, which was the highest percentage in the past 40 years.
"Importantly, hold trends have been modestly positive relative to structural hold to date in '25E including the Super Bowl."
McTernan said DraftKings hitting the 2025 guidance could be an important milestone to prove the company's enterprise economics.
"We believe DKNG has a sustainable customer acquisition strategy that should continue to drive its first- or second-place position in all states."
DKNG Price Action: DraftKings stock is down 5.3% to $50.64 on Tuesday versus a 52-week trading range of $28.69 to $53.61. DraftKings stock is up 40% year-to-date in 2025.
