Increased Competition Could 'Elongate DraftKing's Path To Profitability,' JPMorgan Says

DraftKings Inc (NASDAQ: DKNG) gets a new rating initiation that calls out increased valuation and competition.

The DraftKings Analyst: JPMorgan analyst Daniel Politzer initiated coverage on DraftKings with a Neural rating and a $48 price target.

The DraftKings Thesis: Politzer said there's much to like about DraftKings, but is staying neutral due to stretched valuations and increased competition.

One of the positives mentioned in the report is DraftKing’s position as a leader in the sports betting market giving it a scale advantage. Politzer mentions DraftKings as the preferred online sports betting platform based on surveys and research.

“We believe DKNG’s premium multiple and stock performance reflect its position as the largest and most liquid pure-play in the fast-growing USSB/iGaming industry,” Politzer wrote in a note.

Related Link: Flutter Buys Larger FanDuel Stake, Takes DraftKings Head On In US

The analyst sees shares trading at an increased valuation with shares up over 180% since completing its SPAC deal.

“Increasing competition in USSB/iGaming could elongate Draftking’s path to profitability," he wrote.

The analyst also said the pace of states legalizing sports betting and iGaming could fall short of lofty expectations.

The price target set for the end of 2021 is based on a “blended DCF valuation and 8x 2025 estimated sales, less net debt and discounted back at 8% per year." Politzer gives DraftKings a premium compared to peer sports betting and iGaming companies.

DKNG Price Action: Shares of DraftKings are down 2.48% to $48.03 on Monday at publication time.