Barry Jonas of Truist and Chad Beynon of Macquarie both lowered their DraftKings stock targets ahead of the company’s earnings release in two weeks.
The targets fell as both lowered earnings estimates for the second quarter. Both cited the increased Illinois tax rate as the primary reason for the declines.
Jonas ($53) and Beynon ($52) each maintained their buy ratings on the stock, with Beynon selecting DraftKings as one of its top stock picks.
DraftKings ($DKNG) will report its earnings after the stock market closes Aug. 1 and hold its conference call the next morning at 8:30 am Eastern.
DraftKings stock a top Beynon pick
Beynon selected both DraftKings and Genius Sports as his top online picks.
The stocks are “showing attractive growth at reasonable prices,” Beynon explained, with DraftKings expected to grow EBITDA at a compound annual growth rate of 75% through 2026 and Genius at 35%.
The recent selloff of DKNG is overdone, Beynon said, which sets the stock up for growth on the second quarter results.
Detailing DraftKings estimate changes
Beynon lowered his 2024 DraftKings EBITDA forecast to $479 million, down 8.8% from his prior estimate. He also reduced his 2025 forecast by 1.6% to $794 million and 2026 by 0.8% to $1.361 billion.
Jonas, meanwhile, now expects $130 million in second quarter EBITDA, down 12.8% from his prior estimate of $149 million. Along with the tax increase, Jonas noted “well known” hold mix issues and promotional expenses “relating to better than expected downloads.”
He now forecasts $452 million (down 10.5%) in annual EBITDA for 2024 and $991 million (down 1%) in 2025. Factoring into the annual decrease is a $40 million impact from Illinois and a $10 million loss from the Jackpocket acquisition.
Jonas believes DraftKings can offset the higher tax impact in 2025 and beyond, possibly by offering worse odds. How that happens will “clearly” be a focus of the call and could drive the stock, he added.
