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Investing.com - Benchmark maintained its Buy rating and $43.00 price target on DraftKings Inc. (NASDAQ:DKNG) on Wednesday, despite anticipating a challenging third quarter for the sports betting company. Currently trading at $34.69 with a market cap of $17.2 billion, InvestingPro data shows DraftKings is currently undervalued according to its Fair Value model.
The research firm expects DraftKings to face pressure in Q3 from a combination of weak hold and elevated promotional expenses, which will likely impact profitability and lead to results below consensus expectations.
Despite these near-term challenges, Benchmark believes most of the negative factors are already reflected in the company’s current valuation, with investor sentiment having largely reset following recent sector weakness.
Benchmark continues to view DraftKings as a long-term leader in digital wagering, citing strong product execution, a growing user base, and durable industry tailwinds as supporting factors for its positive outlook.
The firm highlighted DraftKings’ acquisition of Railbird Technologies as a strategic turning point, suggesting that what had been perceived as a competitive headwind from prediction markets may now become a meaningful tailwind, positioning the company to participate directly in a growing segment of digital gaming.
In other recent news, DraftKings Inc. has announced the acquisition of Railbird Technologies and its subsidiary, Railbird Exchange. The acquisition, which was made public after market close, allows DraftKings to enter the prediction markets space, offering regulated event contracts through a new mobile app called DraftKings Predictions. While the financial terms of the deal were not disclosed, Railbird’s CFTC license provides DraftKings with an established platform for predictions. Despite expectations of a weak upcoming quarter, Citizens has maintained its Market Outperform rating and a $51.00 price target for DraftKings, anticipating that sports betting and iGaming revenue may fall short of market expectations. Stifel also reaffirmed its Buy rating and $51.00 price target following the acquisition. Additionally, Berenberg upgraded DraftKings from Hold to Buy, citing improvements in margins and solid growth, although it slightly lowered the price target to $43.00. These developments indicate active strategic moves by DraftKings to expand its offerings and improve its financial standing.
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