DraftKings stock price target lowered to $53 at Jefferies on tax headwinds

Investing.com - Jefferies has lowered its price target on DraftKings Inc. (NASDAQ:DKNG) to $53.00 from $60.00 while maintaining a Buy rating on the stock. The stock, currently trading at $41.31, has shown strong momentum with a 15.7% return over the past six months. According to InvestingPro analysis, DraftKings appears undervalued based on its Fair Value calculations, with analysts setting price targets ranging from $36 to $74.

The firm cited tax headwinds from New Jersey, Louisiana, Illinois, and Maryland as the primary reason for the adjustment. Jefferies expects these tax impacts to create approximately $25 million in headwinds in both the third and fourth quarters of 2025, with an additional $10 million headwind in the fourth quarter from Missouri’s launch in December.

Despite these challenges, Jefferies maintained its second-quarter revenue estimate at $1.40 billion and adjusted EBITDA at $212 million, compared to consensus estimates of $1.39 billion and $225 million respectively. For full-year 2025, the firm now projects adjusted EBITDA of $775 million, below the company’s guidance range of $800-900 million and consensus of $839 million.

Looking ahead to fiscal year 2026, Jefferies forecasts approximately $80 million in tax headwinds from New Jersey, Louisiana, and Maryland, along with roughly $75 million in launch fees for Missouri and Alberta, and a $100 million placeholder for potential prediction market startup costs.

The firm’s 2026 revenue estimate now stands at $7.45 billion, down from its previous $7.51 billion projection and below the consensus of $7.55 billion, while adjusted EBITDA is expected to reach $1.25 billion, compared to its earlier $1.5 billion estimate and consensus of $1.45 billion.

In other recent news, DraftKings Inc. has announced a new 50-cent transaction fee for all mobile and online sports bets placed in Illinois, effective September 1, 2025. This move comes in response to the state legislature’s decision to significantly increase sports wagering taxes over the past two years. CEO Jason Robins expressed concerns about the impact of these tax hikes on the legal, regulated sports betting industry, suggesting that they could inadvertently boost illegal betting operations. On the financial front, Citi has adjusted its price target for DraftKings to $58, maintaining a Buy rating, while highlighting potential regulatory and tax challenges that could affect the company’s 2025 outlook. JPMorgan has initiated coverage with an overweight rating and a $50 price target, citing mixed short-term prospects but a favorable long-term growth outlook in the digital gaming sector. Bernstein has reiterated an Outperform rating, emphasizing DraftKings’ enhanced live pricing capabilities and potential growth in US live betting. These developments reflect the evolving landscape for DraftKings as it navigates both regulatory challenges and growth opportunities.

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