What happened
Shares of DraftKings (DKNG +1.21%) rose on Tuesday following analyst commentary. As of 11:40 a.m. ET, the sports book operator's stock price was up more than 3%.
NASDAQ: DKNG
Key Data Points
So what
Several Wall Street investment firms cut their price targets on DraftKings' stock after the fantasy sports and gambling company said it would generate larger losses than many investors expected in 2022. Despite the reduction to estimates, many of these new forecasts are still well above DraftKings' current share price of near $18.
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Needham analyst Bernie McTernan slashed his target from $46 to $32. However, he maintained his buy rating on the stock. McTernan noted that DraftKings has already achieved profitability in five states, and the company anticipates that it will double that figure this year.
Craig-Hallum analyst Ryan Sigdahl also cut his price forecast, from $51 to $40. Yet he, too, reiterated his buy rating. Sigdahl highlighted DraftKings' better-than-expected revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter. Although he expects the company's heavy marketing expenses to weigh on its results in 2022, Sigdahl thinks DraftKings' profitability will continue to improve over time.
Canaccord analyst Michael Graham likewise reduced his target price, but he also rates the stock as a buy. Moreover, Graham believes the company's shares could triple to $55, due in part to its strong user engagement and retention trends, as well as the company's potential to enter newly legalized markets.
Now what
DraftKings' stock price is likely to remain volatile, as investors struggle to weigh its massive growth potential against its mounting near-term losses. Yet analysts continue to defend the stock, and if DraftKings can make progress toward achieving profitability, its share price could ascend toward their lofty targets.
