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Why DraftKings Stock Is Falling Sharply Today

By Rich Duprey - May 10, 2021 at 11:52AM

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Does the sportsbook's sell-off make it a slam-dunk buy?

What happened

Shares of DraftKings (DKNG -4.19%) were falling 6% heading into noontime trading Monday after a raft of analysts downgraded their price targets on the sportsbook's stock.

So what

DraftKings posted an impressive beat-and-raise performance last week after reporting revenue that was ahead of Wall Street's forecasts and at the high end of management's own guidance. 

Basketball player leaping to slamdunk a ball

Image source: Getty Images.

The company then hiked its full-year outlook for revenue to a range of $1.05 billion to $1.15 billion, an increase of $150 million over prior guidance, and more than double the amount of the first-quarter revenue beat.

That suggests management is expecting to see even stronger results in the coming quarters.

Now what

If the lowered price targets appear a bit incongruous considering how much Wall Street was lauding the company just a few days ago, a Morgan Stanley analyst said that on second thought, DraftKings is guiding to greater EBITDA losses this year and is going to be issuing more stock than it expected. As a result, he lowered the investment bank's target price to $63 per share from $66, but kept an overweight rating on it.

Similarly, analysts at Needham and Craig-Hallum slightly lowered their targets while also remaining otherwise bullish on the long-term prospects for the growth stock.

Cowen analyst Stephen Glagola, however, who is also very bullish on DraftKings, maintained his $70 target.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

DraftKings Inc. Stock Quote
DraftKings Inc.
$18.54 (-4.19%) $0.81
Morgan Stanley Stock Quote
Morgan Stanley
$90.20 (1.47%) $1.31

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