DraftKings Stock Still Has Plenty of Upside, Says Analyst

DraftKings (NASDAQ: DKNG) stock up already more than doubled to embark on 2023, but at least ane analyst sees shares of the sportsbook operator delivering more upside.

In a mention to clients today, UBS psychoanalyst Robin Farley says the gaming carry has more fuel inwards its tank. She upgraded DraftKings to “buy” from “neutral” piece boosting her cost target on the public figure to $30 from $19, which implies upside of to a greater extent than 24% from the May 19 close.

Investors may inquire if the carry is expensive presumption that DKNG is now upwards +112% YTD, but we believe farther upside is possible presumption the faster ramp inwards new states,” wrote Farley.

Investors are embracing the analyst’s constructive commentary. In midday trading, shares of DraftKings are higher by 8.83% on loudness that’s nearly three-fold the day-to-day average. The stock’s intraday high-pitched today of $26.41 represents the highest levels since mid-January 2022.

Margin, Revenue Expansion Could Support DraftKings Stock

DraftKings is getting a heave from young states, videlicet OH and its place tell of MA where it ranks 1st inwards terms of marketplace share. For the rest of this year, it’s likely that only if KY and Puerto Rico fall in the roster of states where roving sports betting is live and legal.

That implies modified honest intelligence on the legislative front, but DraftKings has other catalysts at its disposal, including revenue growth and security deposit expansion. Farley estimates the operator’s 2023 144 perimeter will hike 50 foundation points to 39.3% this twelvemonth and could impinge on 40% next year. With help from higher carry and existing customers embracing unexampled betting products, DraftKings tin pitch significant combine one-year growing on the top line.

“We trust DKNG tin can redeem a +20% revenue [compound yearbook ontogenesis rate] from ’23E to ‘26E. We are increasing our ‘23 revenue approximation to $3.19B from $2.91B prior, in line of products with society steering of $3.135- 3.235B and we reckon DKNG delivering a +20% revenue CAGR through 2026. Our ’26 revenue guess of $5.54B is supra Street’s $5.36B,” according to the UBS analyst.

Her $3.19 1000000000000 revenue calculate is slightly higher up the company’s revised midpoint of $3.185 billion, which it released earlier this month.

Existing States Helping DraftKings, Too

While sports betting industry observers are e'er pondering what tell will be the next to legitimatize and when the behemoths of California, Texas and Florida testament fall in the party, the states inward which DraftKings has been live for extended periods of time shouldn’t be missed inwards the shuffle.

In most of those jurisdictions, DraftKings trails competitor FanDuel in market divvy up terms, but Farley noted the operator is realizing higher per participant receipts gaming revenue (GGR) inwards states inward which it was operational prior to this year.

Separately, another accelerator for DraftKings caudex could be unforesightful covering. Short interest in the call is 7.22% and some of those traders could follow playing with go off if the shares reach out the already torrid 2023 pace.

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