Shares of DraftKings (NASDAQ: DKNG) surged in morning trading on Monday after top-rated UBS analyst Robin M. Farley upgraded the online betting company to a Buy from a Hold and shrugged off any valuation concerns as the stock has rallied by more than 100% year-to-date.
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Farley has a price target of $30 on the stock implying an upside potential of 15.2% at current levels. The analyst commented, “Investors may wonder if the stock is expensive given that DKNG is now up +112% YTD, but we believe further upside is possible given the faster ramp in new states.”
The analyst has forecast DKNG’s revenues to grow at a compounded annual growth rate (CAGR) of more than 20% from 2023 to 2026 driven by a high growth within existing user usage on the platform. In addition, Farley expects that DKNG’s gross margin could be as high as 40% in 2024 following cost rationalization and leveraging benefits.
Analysts are cautiously optimistic about DKNG stock with a Moderate Buy consensus rating based on 16 Buys, eight Holds, and two Sells.