On Tuesday, TD Cowen adjusted its outlook on DraftKings Inc. (NASDAQ: NASDAQ:DKNG) shares, raising the price target to $55 from the previous $50, while reaffirming a Buy rating on the shares. The revision follows DraftKings' report of a year-over-year surge in active customers and a decrease in customer acquisition cost (CAC), which contributed to an improved EBITDA margin.
DraftKings' revenue growth, although slightly below analyst expectations, was described as robust by the analyst from TD Cowen. The company's recent performance was bolstered by an increase in active users and efficiencies in CAC. These factors have played a key role in enhancing the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin.
The updated full-year 2024 guidance takes into consideration the impact of customer-friendly NFL game outcomes, which have been partially mitigated by the company's cost optimization efforts. The analyst noted that these adjustments have been factored into the new price target.
Furthermore, the legalization of sports betting in Missouri is anticipated to provide a significant boost to DraftKings' revenue and EBITDA. More detailed estimates regarding the financial impact of Missouri's market opening can be found on page 5 of the analyst's report.
The stock price target increase to $55 is also based on improved projections for DraftKings' EBITDA in fiscal year 2028, as per the analyst's comments. This long-term outlook underscores the positive expectations for the company's financial trajectory.
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