On Monday, Oppenheimer maintained its positive stance on DraftKings Inc. (NASDAQ: NASDAQ:DKNG), reiterating an Outperform stock rating and a $60.00 price target for the company's shares. The firm addressed the recent downturn in DraftKings' stock value, which has seen a 16% decline from its March 26 peak, a steeper drop than the S&P 500's 4% fall over the same period.
The decline is attributed to a combination of factors including unfavorable March sporting results, political discourse around problem gambling, and projections of the second quarter likely showing the lowest year-over-year revenue growth due to challenging comparisons and some April revenue pressures.
The analyst from Oppenheimer noted that the volatility in Gross Gaming Revenue (GGR), especially with DraftKings ranking as the No. 3 operator in New Jersey for March VIP activity, is contributing to the current instability in the stock's performance.
Despite these issues, the firm believes that the core structural fundamentals of DraftKings, such as player engagement and retention, product quality, and advertising effectiveness, remain strong. These factors are expected to support approximately 55% incremental margins in 2024 and help the company meet its long-term EBITDA goals.
Oppenheimer's commentary suggests that the recent market concerns, which include FanDuel's anticipated increase in marketing expenses for 2024 by roughly 10% to 15%, should not deter investors.
The competitive dynamics are seen as stable, and DraftKings' brand scale is believed to be effectively reducing Customer Acquisition Costs (CAC). Based on these assessments, Oppenheimer encourages investors to consider purchasing shares during this period of weakness, maintaining the $60 price target for DraftKings Inc.
InvestingPro Insights
In light of the recent analysis by Oppenheimer on DraftKings Inc. (NASDAQ: DKNG), real-time data from InvestingPro complements the bullish outlook. The company's market capitalization stands at a robust $19.3 billion, reflecting investor confidence in its growth potential.
Despite a negative P/E ratio, which underscores the company's current lack of profitability, analysts are optimistic, forecasting net income growth and sales expansion in the current year. This aligns with the substantial revenue growth DraftKings has experienced over the last twelve months, at an impressive 63.6%.
InvestingPro Tips further reveal that while the stock has experienced significant volatility and a recent downturn, the long-term view remains positive. DraftKings has delivered a high return over the last year and analysts predict the company will turn profitable this year, an expectation that may buoy investor sentiment.
With a moderate level of debt and no dividend payouts, the company seems to be reinvesting its earnings into growth and expansion. For investors seeking more in-depth analysis, there are an additional 13 InvestingPro Tips available, offering a comprehensive perspective on DraftKings' financial health and market position.
For those considering an investment in DraftKings, now might be an opportune time to explore the detailed insights available on InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and stay ahead with real-time data and expert analysis.
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