DraftKings proved its structural hold is strong enough to shake off a few bad weeks of NFL results, which kept analysts bullish on the stock.
Multiple analysts raised their DraftKings price targets and maintained their positive rating following Friday’s fourth quarter earnings call.
The positive commentary should continue the run DKNG has seen since the beginning of 2023. Friday’s close of $44.57 was nearly 4 times higher than the $11.39 it closed at on Dec. 30, 2022.
Even praise from analysts cannot overcome market concerns like a potential Fed rate hike, though. DKNG closed Tuesday down 7.29% to $41.32 amid broader market concerns.
Updated PTs for DraftKings stock
Barry Jonas of Truist and Chad Beynon of Macquarie raised their price targets by $10, to $55 and $54 respectively.
- Jonas noted his target change included higher multiples given the stock’s run since he upgraded DKNG to buy in August (up 41% compared to 11% growth for S&P.)
- Shaun Kelley from Bank of America also noted the market’s re-rating of growth stocks as his reason for moving to $50 from $45 in a note published a day before earnings were announced.
- Jeffrey Stantial of Stifel raised his target to $50 from $45 on higher estimates and maintained the buy rating he upgraded to in January.
Parlay-improved hold is key
Adjusted EBITDA for the fourth quarter missed consensus estimates by $35 million, but the fact the hole was not deeper is the positive spin out of the miss. Those two customer-friendly weeks at the end of November left $126 million in EBITDA off the books for DraftKings.
Opinions vary about how operators performed in the Super Bowl, but structural hold improvements helped there too, management said. Despite the unfavorable win by Kansas City, DraftKings hold was in line with expectations because of the strength of its same-game parlay product.
Raising EBITDA guidance for the year sent a strong message about current trading in the first quarter as well. DraftKings upped the midpoint of its EBITDA guidance range to $460 million, compared to $400 million initially.
Beynon noted $35 million of that increase is driven by stronger customer metrics, like acquisition and retention. The other $25 million comes from that improved structural hold.
Jackpocket great for cross-selling
The $750 million acquisition of lottery courier Jackpocket might make DraftKings’ story a bit more complex, but Stantial noted attractive economics and growth outlook for the market.
More than that, management said the thought behind the purchase is more about cross-selling with Jackpocket at customer acquisition costs that are more than 80% more efficient than DraftKings.
The solidification of the Jackpocket brand and the growth of its database should only be amplified by DraftKings owning it, Jonas said.
