DraftKings Stock Has Tailwinds, but Valuation Stretched Says Analyst
It’s peeling rear today, connection the broader securities industry to the downside, but DraftKings (NASDAQ: DKNG) is on a scintillating bleed to take up 2023.
A 10.10% pull in over the past calendar week has shares of the gaming equity higher by 88.30% twelvemonth to date. Even with that mammoth gain, tailwinds remain, but the valuation is stretched. That’s the call from Bank of America analyst Shaun Kelley who highlighted DraftKings inward a annotation to clients on Monday.
We direct DKNG’s Q1 revenue slightly outpaced the US market at +11% quarter-over-quarter on securities industry portion out gains, helped past strength inwards unexampled states (Ohio and Massachusetts),” wrote Kelley. “However, our network gaming revenue (NGR) idea is cut down 15% quarter-over-quarter due to promotions, unexampled nation launches, and daily fantasy sports (DFS) seasonality. We believe higher hold, improving product mix, and shorter payback periods for unexampled customers are all tailwinds for DKNG.”
The Boston-based troupe delivers first-quarter results on May 4.
DraftKings Earnings Outlook
DraftKings antecedently provided financial guidance for 2023, and some analysts trust the keep company could wear out even out on the groundwork of earnings before interest, taxes, depreciation, and amortization (EBITDA) this year spell generating electropositive earnings per apportion (EPS) at some peak in 2024.
Looking toward the upcoming first-quarter report, Wall Street expects DraftKings to put up an EPS deprivation of 84 cents on the base of in the main accepted accounting system principles (GAAP) spell notching revenue of $689.42 million. Over the past 90 days, deuce analysts boosted EPS forecasts on the gaming society piece Nina from Carolina downwardly revised estimates.
While the sportsbook manipulator has yet to put up a profitable quarter, it has constituted a case in point for thrashing topline estimates. Analysts estimation DraftKings’ revenue will get an medium of 22% every year through and through 2026.
The gaming company’s antecedently revealed counseling called for 2023 sales of $2.85 1000000000000 to $3.05 billion and an EBITDA red ink of $350 billion to $450 million. An obvious accelerator for the stock would be for the manipulator to put up full-year revenue direction while reducing its deprivation forecast following the first-quarter financial report.
DraftKings Stock Not Cheap
As is often the example with emerging growing stocks next scorching runs to the upside, valuations looking at a little to a lesser extent appealing. Bank of America’s Kelley noted that’s the vitrine today with DraftKings.
Revisiting valuation, DKNG trades at 12.9x stabilized 2025 EBITDA (using 20% margins and our estimated 2025 revenue), which is in-line with actual Earnings Before Interest Taxes Depreciation and Amortization multiples for Flutter and heights growth technology stocks,” added the analyst. “While we conceive DKNG’s carrying out has turned and online gaming has higher revenue development vs. richly tech comps, this valuation already feels like it factors inward real execution and important upside to consensus.”
Flutter is the parent accompany of FanDuel, the largest online sportsbook manipulator in the US as metrical by market place share. Kelley noted DraftKings’ marketplace part likely increased past 0.15% to 26.6% inwards the 1st iii months of this year.
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