Several industries benefitted handsomely from work-from-home trends and government assistance payouts. Although spending one’s stimulus check on an online sports betting (OSB) platform isn’t typically fiscally advised, companies like DraftKings Inc. (DKNG) cashed in on the folks willing to make the gamble. Despite the company’s strong earnings results, these trends are waning, and the future may see some deceleration in the sector. (See DraftKings stock charts on TipRanks)
Carlo Santarelli of Deutsche Bank reported on the forecast, neutrally stating that although the stock beat Wall Street consensus estimates and management even raised net revenue guidance about 14%, he sees “shares as fairly valued at current levels.”
Santarelli assigned a Hold rating on the stock, and added a price target of $51. Although this target comes from his previous level at $50, it currently represents a possible 12-month downside of –1.14%.
The five-star analyst explained that the August 6th Q2 earnings beat was not all that surprising to him, citing increased user retention and engagement on the platform. He did admit, though, that H2 upside could include football season and the elevated OSB activity which it typically brings.
The industry is expected to see stiff competition, with two large casino operators aggressively investing in their businesses during H2 of FY21, mentioned Santarelli.
Speaking positively on future outlook for DraftKings, Santarelli wrote that the full year revenue guidance provided does not take into consideration any possible state legalizations of OSB or other regulatory relaxations. In the U.S., there are six states which have yet to permit OSB activity. If any of these were to make high profile regulatory moves in favor of the industry, DraftKings would be expected to see near-term upside, at least.
On TipRanks, DKNG has an analyst rating consensus of Moderate Buy, based on 11 Buy and 5 Hold ratings. The average DraftKings price target is $64.22, reflecting a possible 12-month upside of 24.48%. DKNG closed trading Friday at a price of $51.59 per share.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.