Street Calls of the Week
Investing.com -- Berenberg upgraded DraftKings to Buy from Hold, saying the recent 20% drop in its shares was excessive given the company’s continued growth and margin improvement.
The brokerage set a new price target of $43, about 30% above current levels.
The analysts said the sell-off was driven by fears that prediction markets could disrupt the online sports-betting industry but added that there has been “no impact on numbers so far” and that the legality of those platforms remains unclear.
“We think the move is overdone,” they wrote.
Berenberg noted that DraftKings has performed well this year despite adverse sports results in September, which led to slightly lower estimates.
The company has continued to expand margins and narrow the gap with rival FanDuel, with its net revenue margin now 80 basis points closer year over year.
The bank cut its third-quarter forecasts to account for the weak sports results, expecting revenue of $1.25 billion and an EBITDA loss of $34 million. For 2025, it projects revenue of $6.23 billion and EBITDA of $771 million, within guidance but toward the lower end. For 2026, Berenberg forecasts $7.52 billion in revenue and $1.3 billion in EBITDA, slightly below consensus.
Berenberg said it sees opportunity as the U.S. online gambling market expands from a still-low 16% online penetration and expects both iGaming and sports-betting to grow.
Though prediction market noise has weighed on sector shares but analysts sees no fundamental change in demand.
Given the lack of disruption to date and the long-term potential of the U.S. market, “we view the pullback as unjustified,” Berenberg said.