DraftKings stock rating reiterated at Market Outperform by JMP

Investing.com - JMP Securities has reiterated its Market Outperform rating and $50.00 price target on DraftKings Inc. (NASDAQ:DKNG), maintaining a positive outlook despite industry concerns. The sports betting giant, currently trading at $40.77 with a market cap of $20.23 billion, has demonstrated strong momentum with analyst targets ranging from $36 to $74.

JMP analyst Jordan Bender dismissed fears about potential legislative impacts on the sports betting industry as "overblown," according to the research note.

The analyst explained that legal sportsbooks like DraftKings operate on a business model where they are "not in the business to lose money" and typically limit wagering sizes or restrict winning customers.

JMP noted that winning players are more likely to bet offshore or with traditional market-making books, while VIP customers who account for "25% to 50% of company revenue" are typically net losers for the platform.

The firm believes these VIP customers "would not be impacted by the incremental taxation" referenced in the legislation, supporting their continued positive outlook on DraftKings’ business model.

In other recent news, DraftKings Inc. reported several noteworthy developments affecting its financial outlook. Jefferies has adjusted its price target for DraftKings to $53, citing tax headwinds from several states, including New Jersey and Illinois. Despite these challenges, Jefferies maintained its second-quarter revenue estimate at $1.40 billion, slightly above the consensus. Meanwhile, Citi raised its price target for DraftKings to $58, pointing to market multiple expansion, but cautioned about the potential need to revise the 2025 outlook due to regulatory changes. JPMorgan initiated coverage with an overweight rating, highlighting a mixed near-term outlook but expressing confidence in the company’s long-term growth potential. Bernstein reiterated an Outperform rating, emphasizing DraftKings’ enhanced live pricing capabilities and potential growth in live betting. Additionally, DraftKings announced a new $0.50 transaction fee on bets placed in Illinois in response to recent tax increases, which the company attributes to policy changes by the state legislature. CEO Jason Robins expressed concerns about the impact of these tax hikes on the regulated sports betting industry.

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