Investors slapping a few dollars down on DraftKings (DKNG -4.55%) stock Tuesday didn't make the best pick. The next-generation sports gambling company's shares fell by nearly 8% on the day, due in no small part to a recommendation cut from an analyst at a high-profile bank.
Tuesday morning, Citigroup's Jason Bazinet gave his DraftKings price target a 20% haircut. He now believes the stock is worth $28 per share, down from the previous $35. That said, he's maintaining his buy recommendation, as the new level is more than double the current price of the shares.
In his new research note on the company, Bazinet wrote that his modification is based on a slight decline in DraftKings' active accounts, and a lower target enterprise value per account.
The analyst is basing his take on the company's recently announced first-quarter results.
These were unveiled last month, and revealed a 34% year-over-year jump in revenue (to $417 million) on the back of a 29% increase in "monthly unique payers," a key customer metric for the company. DraftKings also raised its guidance for 2022 revenue and non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA).
It's revealing that, despite his price target cut, Bazinet is still rather bullish on DraftKings shares. That's entirely warranted, as the company is still in the early stages of legalized sports gambling in the U.S. Currently, users of its mobile app in 17 states can wager money on contests, leaving plenty of room for organic growth as other states flip the legalization switch.