DraftKings stock has soared amid heightened interest in online sports betting during the pandemic.
Scott Eisen/Getty Images for DraftKings
DraftKings stock rose Tuesday as the company held a virtual investor day presentation. The sports betting firm raised long-term financial targets.
Shares were up 2.8% to $62.20 on Tuesday, while the S&P 500 index was up 1.4%. Shares rose another 3% in premarket trading on Wednesday.
DraftKings (ticker: DKNG) said it raised its long-term net revenue estimate to $5.4 billion, up from $3.7 billion. The company also raised its long-term adjusted earnings before interest, taxes, depreciation, and amortization target to $1.7 billion from $1.2 billion. Management pointed to its expectation that the total addressable market for legalized online sports betting and online casino games in North America is larger than its prior forecasts.
“We come away from DKNG’s investor day impressed with the company’s ability to acquire and maintain customers through its product/technology, and believe the company is well positioned to drive improving unit economics over time,” JPMorgan analyst Daniel Politzer wrote in a note Tuesday.
DraftKings stock has soared 254.8% since its April merger with a special-purpose acquisition firm. The stock has soared amid heightened interest in online sports betting during the pandemic. More states have also rolled out online sports betting, with others like New York moving in that direction to plug pandemic-driven budget shortfalls.
Politzer wrote that DraftKings expects customer acquisition costs relative to revenue to come down gradually over time. As more states roll out online sports betting, the company says its advertisements targeting national audiences will be more effective.
“Another common theme during today’s investor day was the use of data to drive decisions,” Politzer wrote. “This is evident in DKNG’s ability to customize offerings to customers based on sports, games, and even the dollar amount most likely to be wagered. Another example is a user with a lower balance receiving promotions for deposit bonuses.”
That said, Politzer has a Neutral rating on the stock with a $58 price target. He argues positives like the company’s leadership position in the U.S. online betting business, its sticky customers, and its ability to translate daily fantasy sports customers to betting users are already well reflected in the company’s valuation.
Write to Connor Smith at [email protected]
