Following a notably strong performance this week, DraftKings (NASDAQ: DKNG) continues to prove its status as digital sovereignty among online gaming stocks. This king of the virtual sportsbook roared with an impressive 26.69% gain, reinforcing an already formidable year-to-date increase of 196.31%.
The strong market performance of DraftKings, showcased prominently at the Nasdaq trading site in New York, has piqued interests among seasoned market analysts. Notably, Macquarie analyst Chad Beynon, in a recent note to clients, has heralded DraftKings as the premier entry point into the online gaming market. He underscored his endorsement with an ‘outperform’ rating on the shares, alongside an upgraded price target of $42 from $38. This suggests the potential for a 24.44% upswing from Friday’s market close at $33.75.
DraftKings’ commendable earnings before interest, taxes, depreciation, and amortization (EBITDA) for both the current fiscal year and 2024, coupled with its dominance in domestic gross gaming revenue via internet, played key roles in the stock’s Friday rally; a buoyant surge of 16.46% on a trading volume three times its average – a day after shedding light on its third-quarter performance.
DraftKings continues to carve its reputation in the gaming industry, delivering a consistently strong EBITDA above predictions, complemented by a firm share stake in the online gaming market. Beynon’s note highlight’s DraftKings’ momentum in customer retention, greater structural hold, and astute marketing spending as catalysts for continued success.
Moreover, DraftKings’ recent third-quarter earnings report included a forecast of a substantial reduction in anticipated EBITDA loss for 2023 – down to $105 million from $205 million, on revenue expectations of $3.695 billion. Simultaneously, it predicts a dramatic EBITDA leap in 2024 to between $350 million and $450 million, on a sales forecast between $4.5 and $4.8 billion.
In the face of these forecast figures, DraftKings remains in pole position to deliver its highest ever annual performance in 2024. The confidence portrayed in DraftKings’ audacious forecast has led Beynon to raise the anticipated revenue for 2023 through to 2025 to $3.7 billion, $4.59 billion, and $5.63 billion, respectively. If DraftKings maintains its trend of exceeding and advancing forecasts, Beynon’s glowing endorsement may prove justified.
Beynon suggests that DraftKings’ initial market entrance, combined with its powerful brand recognition among younger audiences and leading technology, position it strongly in an increasingly competitive field of digital gambling.
Analysts believe, given its remarkable market dominance and swift entry into the online gambling space that continues to experience explosive growth, DraftKings, along with rival FanDuel, holds a commanding lead over the competition.
Even three and a half years after its initial public offering, DraftKings’ potential is far from fully realized. Beynon suggests that the company’s journey is just beginning and anticipates consistent double-digit revenue growth for the foreseeable future.
Amid the growing operational efficiency of DraftKings, which has been reflected in the 38% flow-through margins shown in the last quarter, and the 2024 guide that indicates a 53% flow-through at midpoint with considerably positive free cash flow, the company stands primed to preserve its dominant status by continuously reinvesting in its business and technology, Beynon concludes.
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