DraftKings raised to buy as Stifel sees compelling 2024 set-up
Stifel analysts upgraded shares of DraftKings (NASDAQ:DKNG) to Buy from Hold, raising the price target to $45 from $40 per share in a note Friday, saying the company has a compelling 2024 set-up.
The short-term headwinds are distracting from the positive set-up this year, according to the firm.
«DKNG has pulled back modestly from late-2023 highs, as correlation to state reported handle/GGR market share holds firm while Oct-Dec data shows DraftKings losing ground to FanDuel & ESPN Bet,» the analysts wrote.
«We take advantage of the slight correction, as we argue near-term share headwinds are fading (ESPN Bet promos; sports seasonality), enabling investor focus to shift back to the fundamental outlook where healthy same-state handle growth, structural hold-rate expansion, marketing/promo discipline, and fixed cost efficiencies pose upside to an already impressive guided EBITDA path,» they added.
Stifel acknowledges that its «timing here is not without controversy» as a potential hold-driven Q4 miss and Flutter Entertainment US listing approach.
However, the firm would prefer to own the stock «into the forthcoming market share stabilization/inflection vs. waiting to de-risk these catalysts,» while the valuation appears attractive on its fine-tuned estimates."
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