DraftKings, the popular online sports betting app, has seen a continuous rise in its stock price. This was further fueled by an upgrade from Bank of America Securities analyst, Shaun Kelley, who expressed confidence in the company’s near-term performance.
Kelley upgraded DraftKings’ shares (ticker: DKNG) from Neutral to Buy and increased his price target for the stock to $35, up from $25. The analyst believes that the company is on the verge of achieving profitability, supported by the growing number of states legalizing online sports betting and improving costs.
Investors are eagerly awaiting DraftKings’ second-quarter earnings report, scheduled for August 4. They will specifically be interested in the customer acquisition costs and the company’s progress in expanding into new states, all contributing to the path of profitability.
In their first-quarter letter to shareholders, DraftKings revealed a 57% year-over-year increase in new users, along with a significant 27% decline in customer acquisition costs. The company also stated that it is “on the cusp of achieving profitability on an adjusted EBITDA basis.” In fact, they anticipate reaching breakeven on an adjusted EBITDA basis in the second quarter.
Exciting times lie ahead for DraftKings as it continues to gain momentum and positions itself for future success in the online sports betting industry.
Room for Growth in the Online Gaming Industry
According to research conducted by Kelley, the online gaming industry is experiencing significant growth, leading to potential estimate revisions for the second quarter and beyond. As competition rationalizes, Kelley believes that DKNG, as a dominant platform, will assert itself and further increase its product and technology advantage.
DKNG’s stock has already seen an impressive surge of 166% in 2023. On Wednesday, the stock continued to climb, with shares of the online sports betting company rising 7% to $30.99. This puts the stock on track for its highest close since December 2021 and a new 52-week closing high, as reported by Dow Jones Market Data.
Kelley is not the only analyst who holds a bullish stance on the company’s upcoming earnings report. Mike Hickey from Benchmark also raised his price target for the stock to $32 from $26 while maintaining his Buy rating. Hickey expects DKNG to deliver financial results for the second quarter that exceed the consensus view in terms of both revenue and profitability.
Hickey highlights DKNG’s success in acquiring significant market share during new state launches, with a combined 77% market share on handle alongside FanDuel. Furthermore, DKNG has also witnessed meaningful share gains in more mature states during the quarter.
As the online gaming industry continues to grow, it appears that DKNG is well-positioned to capitalize on this trend and solidify its position as a leading player in the market.