It has been a good start to the year for DraftKings (NASDAQ:DKNG) investors. The shares are up by 24% so far, essentially extending last year’s strong rally (the stock is now up by 170% on a trailing twelve-month basis).
With the sports betting firm about to report 4Q23 earnings after the markets close on Thursday (February 15), Oppenheimer analyst Jed Kelly says the gains suggest “higher expectations among shorter-term investors for a ’24 guidance raise.”
Yet, Kelly finds it challenging to predict guidance trends at this point. He writes, “The few state January reports imply GGR grew faster than Street’s 1Q:24E/FY24E’s revenue of 35%/28% y/y,” the analyst went on to say, “however, Super Bowl results were mixed, and March holds are volatile. We would take advantage of any potential pullbacks related to guidance semantics on solid profitability fundamentals.”
Kelly’s 2024 forecast remains as it was, with the analyst calling for revenue of $4.65 billion and EBITDA of $396 million, compared to the Street at a respective $4.67 billion/$412 million.
While Kelly thinks the positive sentiment reflects optimism amongst short-term investors looking at a guidance bump, on balance, the analyst notes that investors offer a mixed view regarding the prospect of one. Neither does Kelly anticipate one resembling the raise made last year. “Initial January reports are encouraging, but we are not expecting a similar beat/raise velocity versus last year where ’23 EBITDA is ~$400M higher than the initial outlook,” the analyst added.
On a side note, Kelly is bullish on the recently announced multiyear betting partnership between DraftKings and Barstool Sports. The fact Barstool owner Dave Portnoy’s announcement generated over 9 million views on X while he also offered a $100,000 free throw contest “highlights ability to marry content/engagement.” Moreover, Kelly expects Barstool to positively affect DraftKings’ social feed.
The upshot of all the above is a new price target from Kelly. His figure goes from $44 to a Street-high $55, suggesting the shares will climb 26% higher from here. Kelly’s rating stays an Outperform (i.e., Buy). (To watch Kelly’s track record, click here)
Amongst Kelly’s colleagues, one remains in the bear camp, two others stay on the sidelines, but with an additional 23 Buys, the stock claims a Strong Buy consensus rating. That said, the $43.73 average target implies that a year from now, the shares will stay at roughly the same level. (See DraftKings stock forecast)
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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.
