What happened
As the trading week came to a close, DraftKings (DKNG +1.21%) was ahead of the game. The next-generation sports betting service provider's stock was up by 2.5% in late afternoon trading Friday, thanks in no small part to a new and bullish analyst note.
So what
Morgan Stanley prognosticator Thomas Allen reiterated his positive outlook on DraftKings that morning. He's keeping his overweight (buy) recommendation on the shares at a price target of $31 apiece, implying nearly 33% upside at the current level.
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Allen feels that DraftKings can reach encouraging levels of profitability. Specifically, he's modeling a 20%-plus margin for 2025. While that's below the figures shown by certain peers, it would be a vast improvement over the string of losses the company has posted so far. In the company's Q3, for example, its headline net loss deepened to over $545 million, from just shy of $396 million in the same quarter the previous year.
"Admittedly, the state-by-state rollout of online sports betting and iGaming makes confidence in a single year difficult ... however, we see 23% margins as achievable at maturity," Allen wrote in his note.
Now what
Given the performance of peer eGambling stocks, it's entirely believable that DraftKings could soon reach healthy double-digit profit cushions. Despite the company's current deep losses, U.S. states continue to liberalize their gambling laws, and DraftKings has proven to be quick and effective at entering new markets. Like Allen, bulls for this company should keep the faith in their stock.
