Sports betting company DraftKings Inc DKNG reported fourth-quarter financial results after market close Thursday.
Analysts size up the earnings result and future of the company.
- BMO Capital analyst Brian J. Pitz has an Outperform rating and raises the price target from $43 to $51.
- Stifel analyst Jeffrey A. Stantial has a Buy rating and a price target of $45.
- Oppenheimer analyst Jed Kelly has an Outperform rating and a price target of $55.
- Needham analyst Bernie McTernan has a Buy rating and a price target of $50.
- JMP Securities analyst Jordan Bender has a Market Outperform rating and a price target of $42.
- Truist analyst Barry Jonas has a Buy rating and a price target of $45.
- Benchmark analyst Mike Hickey has a Buy rating and a price target of $50.
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BMO: DraftKings’ acquisition of Jackpocket is key for Pitz.
"We like the deal and envision significant cross-sell opportunities, noting that customers that overlap between OSB and lottery have 50% higher LTVs," Pitz said.
The analyst said that new state legalization momentum could be a "massive go-forward opportunity" for the company on top of an already improving business in existing legalized states.
Stifel: The fourth quarter results were impressive according to Stantial.
The analyst said a guidance raise in the face of increased competition in the sector should be well received by investors.
"Despite solid Q4 results & FY24 guidance revision, investor focus & stock reaction tomorrow (Friday) will likely center on the simultaneously announced $750M acquisition of Jackpocket," Stantial said.
The analyst said the deal could provide nice cross-sell opportunities, but more information is needed.
"We expect the announced acquisition of Jackpocket to overshadow encouraging operating trends, with investors potentially needing greater visibility into cross-sell & monetization metrics before buying into the deal."
Oppenheimer: The acquisition of Jackpocket could increase the database of users and customers for the company, Kelly said.
The analyst said the fourth quarter results highlight the strength DraftKings has in the sports betting sector.
"We view results supporting our ‘Core Holding' thesis and indicative of the US OSB market firmly evolving into a two-horse race with FLUT's FanDuel," Kelly said of DraftKings and Flutter Entertainment FLUT.
Kelly said Super Bowl LVIII is a great example of DraftKings' dominance in the sector with a mid-teen estimated hold rate and the company having the number one sports betting app based on download data from Sensor Tower.
Needham: Organic trends were strong in the fourth quarter for DraftKings, McTernan said in a new note.
McTernan also said the acquisition of Jackpocket could be an "interesting call option."
"We think the purchase could generate a significant return if iGaming legislation comes to fruition, akin to DFS laying the groundwork to support OSB growth," McTernan said.
The analyst said the acquisition of Jackpocket could lead to increased customer acquisition for DraftKings similar to what daily fantasy sports did for its online sports betting business.
"We see DKNG as a leader in the emerging North America online gambling market, a $35B market opportunity. We think the legislative environment is overall supportive of greater market access as it's a win-win for consumers and states."
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JMP Securities: The Jackpocket acquisition could be a "TAM enhancer" for DraftKings, Bender said.
"The acquisition headline price appears to be a premium for a company that we believe is not generating positive EBITDA, but the long-term impacts are overwhelmingly positive," Bender said.
The analyst said the TAM (total addressable market) opportunity for DraftKings with the acquisition could be "massive" in a potential $70 billion market.
"In a TAM-dominated industry (sports betting and iGaming), DraftKings has now unlocked an incremental cross-selling vertical."
There is high overlap between iGaming and lottery players, Bender adds. That could lower customer acquisition costs and improve the long-term value of each customer.
Truist: The sports betting company raises guidance for 2024 shows its strength, Jonas said.
"Reflecting the strong underlying fundamentals, management raised FY24 guidance from the guide they had just issued in Nov." Jonas said.
The analyst said the Jackpocket acquisition could bring more efficient marketing for DraftKings business. Jonas said the concern is the acquisition will require an "investment phase" before the deal is additive.
Benchmark: The fourth quarter results showed DraftKings success and strategic vision, Hickey said.
"DraftKings Q4 financials demonstrated exceptional resilience and strength, especially after adjusting for unfavorable sports outcomes," Hickey said.
The analyst expects "robust growth prospects" for DraftKings. He cited the guidance raise and items like market expansions, handle growth and higher structural hold rates.
Hickey said the acquisition of Jackpocket could "significantly boost customer value" for the company.
DKNG Price Action: DraftKings shares are up 1% to $45.03 versus a 52-week trading range of $16.75 to $45.62. Shares hit new 52-week highs on Friday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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