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On Monday, CFRA analyst Zachary Warring revised the rating for DraftKings Inc. (NASDAQ:DKNG), elevating it from Hold to Buy, while slightly decreasing the price target to $52 from the previous $53. Warring’s assessment is grounded in a valuation pegged to 4.0 times the company’s anticipated 2025 revenue, which aligns with the midpoint of DraftKings’ historical three- and five-year average forward price-to-sales ratios. According to InvestingPro data, the company currently commands a market capitalization of $17.17 billion.
Despite the recent over 30% decline in DraftKings shares following its Q4 earnings release, Warring views the current stock prices as an attractive opportunity for investors. The shares are currently trading at 2.8 times the projected sales for the next twelve months, which is considerably lower than the company’s average over the past three to five years. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics and insights available to subscribers.
DraftKings, alongside FanDuel, dominates the mobile sports betting market in the United States, with expectations to retain over 80% market share. Warring anticipates that DraftKings will grow by 30% in 2025 and will see increased profitability as it scales back on marketing expenditures. This aligns with InvestingPro data showing impressive revenue growth of 30.07% in the last twelve months, with analysts expecting continued growth and profitability this year.
Furthermore, Warring notes DraftKings’ lack of exposure to the travel sector, a distinct advantage over traditional large casino operators, suggesting that the company is well-positioned to remain resilient in the event of a consumer spending downturn. The analyst concludes that the upgraded rating reflects confidence in DraftKings’ potential to act as a defensive investment within the Casinos and Gaming sub-industry. The company maintains a moderate debt level and has shown strong cash flow generation, with InvestingPro reporting positive levered free cash flow of over $400 million in the last twelve months.
In other recent news, DraftKings Inc. reported adjustments in its financial forecasts due to recent sports events. Guggenheim Securities revised its first-quarter revenue forecast for DraftKings to $1.465 billion, down from the previous estimate of $1.501 billion, and adjusted its expected EBITDA to $124 million from $161 million, citing the impact of the Men’s NCAA Tournament. Despite these adjustments, Guggenheim maintained a Buy rating, although it lowered the price target to $61. Similarly, Needham maintained a Buy rating with a $65 price target but decreased its first-quarter EBITDA estimates by $70 million due to March Madness outcomes.
Citizens JMP retained a Market Outperform rating with a $57 price target, viewing the current stock price as a buying opportunity despite recent value declines. The firm anticipates DraftKings will maintain its 2025 EBITDA guidance at the midpoint of $950 million. In another endorsement, Citizens JMP also reaffirmed a Market Outperform rating with a $60 price target, expressing confidence in DraftKings’ long-term prospects following a meeting with company executives. Lastly, Benchmark maintained its Buy rating and $51 price target, noting a rebound in betting activity and improved hold rates in the first quarter of 2025, driven by increased NBA betting volume and successful Super Bowl outcomes.
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