Such is the force of current bearish market sentiment, that even after delivering the goods on all the important metrics in 1Q22, DraftKings (DKNG) shares tumbled in the subsequent session.
Boosted by a move into states where sports betting was only recently legalized and a decent showing from the company’s customer acquisition, engagement, and retention undertakings, revenue clocked in at $417 million, above the analysts’ forecast of $412 million. The EBITDA loss also came in better than Street expectations – at $289.5 million, compared to $329 million. This resulted in adj. EPS of -$0.74 vs. the -$1.09 consensus estimate.
And the company also boosted its outlook for 2022. Revenue for the year is anticipated to come in between $1.93 billion and $2.03 billion, up from the prior guidance of $1.85 billion to $2 billion. The company was also expecting an EBITDA loss of $825 million to $925 million beforehand but now anticipates that will narrow to a loss between $760 million and $840 million this year.
Evidently, and as noted by the company, while inflation concerns have yet to abate, DraftKings is not feeling its impact on customer demand, an indication that OSB/iGaming remains a pastime favored by many even in a difficult macro climate. This is a point reiterated by Morgan Stanley’s Thomas Allen.
“Despite investor concerns around currently unprofitable companies, online sports betting / iGaming is a proven profitable business globally and DKNG continues to prove itself as one of the leaders in the US,” the 5-star analyst. “In addition, we believe the US market is so nascent it’s unlikely to show any meaningful weakness if the economy turns.”
Applauding the “strong” quarter and guidance, and conveying Allen’s “confidence in the long-term outlook,” the analyst maintained an Overweight (i.e., Buy) rating along with a $31 price target. There’s upside of 173% from current levels. (To watch Allen’s track record, click here)
Allen’s objective is just above the Street’s $29.18 average target which is set to generate returns of 157% in the year ahead. Those are some big gains, which are projected despite the mixed ratings; the analyst consensus views this stock a Moderate Buy, based on 11 Buys vs. 10 Holds. (See DraftKings stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
