Stifel analysts upgraded DraftKings (NASDAQ:DKNG) from Hold to Buy, increasing the stock’s price target from $40 to $45 per share. The analysts highlighted DraftKings’ promising prospects for 2024, suggesting that current short-term challenges are overshadowing the company’s positive trajectory this year.
The analysts noted that despite DraftKings’ slight pullback from its late-2023 highs, its performance remains closely tied to market shares in state-reported handle/GGR. They observed that from October to December, DraftKings saw a reduction in market share compared to competitors like FanDuel and ESPN Bet.
However, the analysts see an opportunity in this minor correction. They argue that near-term challenges, such as competitive promotions from ESPN Bet and sports seasonality, are diminishing. This shift allows investors to refocus on DraftKings’ fundamental strengths, including robust same-state handle growth, structural hold-rate expansion, disciplined marketing and promotions, and fixed cost efficiencies. These factors, the analysts believe, could lead to potential upside beyond DraftKings’ already promising EBITDA guidance.