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Needham Backs DraftKings Amidst Market Volatility
19 Sep
Summary
- Needham reiterated a Buy rating and $35 price target on DraftKings.
- Company management expressed optimism about market access opportunities.
- DraftKings aims for billions in EBITDA through fixed cost reduction.
Needham maintained a Buy rating and a $35 price target for DraftKings (NASDAQ:DKNG), following recent investor meetings. The company's stock currently trades at $22.47, reflecting a 9% decrease over the past week and a 35% year-to-date decline. Despite these figures, analysis suggests DraftKings may be undervalued.
Company management affirmed their commitment to a data-driven strategy for customer acquisition and highlighted how their product contributes to market share gains, particularly among new users. They also addressed competitive concerns, stating that the online sports betting market has remained consistent this year and that fears of intense competition are exaggerated.
DraftKings expressed enthusiasm for potential market access, including iGaming in Maryland and Virginia, and online sports betting in Georgia. The company anticipates that issues related to predictive modeling will be resolved by the Supreme Court. A key strategic focus involves reducing fixed costs to improve margins and achieve substantial EBITDA, aiming for multiple billions of dollars.
Recent surges in prediction market volumes, with over $3 billion traded on Saturday and Sunday, coinciding with the NFL season, further underscore the dynamic betting landscape. Analysts predict DraftKings will achieve profitability this year. Other firms, like Stifel and StoneX, also reiterated Buy ratings, underscoring DraftKings' strength in areas like parlay betting, though some regional data from New York indicates a decline in sports betting handle and revenue.
