DraftKings
stock continued to rise on Wednesday after a
Bank of America
Securities analyst upgraded shares of the online sports betting app, citing confidence in its near term performance.
BofA analyst Shaun Kelley upgraded shares of
DraftKings
(ticker: DKNG) to Buy from Neutral and raised his price target on the stock to $35 from $25. Kelley has confidence that the company is close to becoming profitable as more states legalize online sports betting and costs improve.
DraftKings
is expected to report second-quarter earnings on August 4. Investors will be keeping an eye out for customer acquisition costs and moves towards launching in new states as the company makes steps towards becoming profitable.
The company said in its first-quarter letter to shareholders that new users increased 57% year-over-year while customer acquisition costs declined 27%. DraftKings also said that the company was “on the cusp of achieving profitability on an adjusted Ebitda basis” and expected to be about breakeven on an adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization basis in the second quarter.
“We see room for estimate revisions for both the [second quarter] and coming quarters and years, as the online gaming industry grows, competition rationalizes and DKNG asserts itself as a dominant platform and its product and its technology moat increases,” Kelley wrote in a research note.
Kelley’s upgrade comes as the stock has soared 166% in 2023. And on Wednesday, the stock kept climbing. Shares of the online sports betting company were rising 7% to $30.99, with the stock on pace for its highest close since December 2021 and a new 52-week closing high, according to Dow Jones Market Data.
Kelley is not the only analyst to be bullish on the company coming into earnings. Benchmark analyst Mike Hickey raised his price target on the stock to $32 from $26 and maintained his Buy rating on Wednesday.
“We estimate DKNG will deliver [second quarter] financial results that exceeded consensus view on both revenue and profitability,” Hickey said in a research note. “…DKNG has acquired material market share in new state launches, where DKNG and FanDuel have averaged a combined 77% market share on handle. Further, we have observed meaningful share gains from DKNG in more mature states in the quarter,” he added.
Write to Angela Palumbo at [email protected]
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