DraftKings Remains a Favorite Among Analysts Despite Earnings Miss

DraftKings, the popular sports betting company, managed to maintain optimism among its investors despite facing an unexpected loss in its latest earnings report. Having delivered better than expected bottom-line results for eight consecutive quarters before this hiccup, DraftKings' minor setback was met with an overall positive outlook for its future.

Analysts Retain Confidence in DraftKings

Analyst Robert Fishman from MoffettNathanson highlighted how 2023 was nearly seamless for DraftKings, except for a few unfavorable sporting event results that impacted its earnings. However, CEO Jason Robins reassured shareholders with a promising message for 2024—anticipating it to bring 'more of the same' success. This expectation is reflected in Fishman's reiteration of a buy rating and a $52 price target for the company's stock.

Despite the unsteady trajectory in the latest quarter, DraftKings shares have kept steady, buoyed by a phenomenal 209% surge in 2023 and maintaining a 26% rise year-to-date in 2024. Jefferies analyst David Katz remains confident in the company's position in the growing market, especially with ongoing product improvements that are expected to continue driving revenue and profit growth.

Strategic Acquisitions to Fuel Growth

Katz also noted DraftKings' approximately $750 million acquisition of Jackpocket, an online lottery company, as a 'strategically sound' move that could expand their customer base. He believes that DraftKings is on track to start generating free cash flow in 2024, which could be invested back into the company for product enhancement and further growth.

Expansion into new markets where online sports betting and iGaming aren't yet legal could also provide an efficient method of acquiring customers in anticipation of those markets opening up, said Katz, who has put forth a buy rating and a $46 target price on DraftKings.

Outlook Remains Bright Despite Challenges

Piper Sandler’s Matt Farrell pointed out that the fourth quarter was negatively affected by unfavourable sports outcomes, but still saw a positive future for DraftKings, citing the company's established pattern of raising its full-year outlook as the year progresses. Farrell lauded the improving 'core dynamics' of customer acquisition, retention, engagement, and structural hold rates—the percentage of wagered money that the company retains.

With no expected slowdown in the current tailwinds and a significant legislative backlog, analysts like Farrell predict that DraftKings can continue its successful strategies for the foreseeable future. He retains an overweight rating and sets a $50 target price for DraftKings shares.

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