What happened
At times when watching sports on TV these days, it's easy to get the impression that we're awash in sports gambling services. This ubiquity is dramatically boosting the profile of DraftKings (DKNG -0.87%), a top operator in that business. On Monday, investors' optimism about the company was enhanced by an analyst's upgrade of its stock.
So what
On Monday morning, UBS prognosticator Robin Farley changed her rating on DraftKings to buy from her previous rating of neutral. She also dramatically increased her price target on the shares to $30. Previously, her target was $19.
Farley based her new DraftKings take on the company's quicker penetration into states that have recently legalized sports betting, what she terms "improvements in structural hold," and its higher revenue per user.
The company has excellent potential in the short- to mid-term, she believes. According to her estimates, DraftKings is poised to improve its revenue at a compound annual rate of more than 20% from 2023 to 2026. This will be helped by even faster penetration into new markets.
Farley isn't the only analyst getting more bullish on the company's prospects. Last week, Ed Young of white-shoe investment bank Morgan Stanley lifted his price target on the stock $2 higher to $25. Young maintained his optimistic overweight (read: buy) rating on DraftKings.
Now what
DraftKings is aggressively -- and in many respects, successfully -- positioning itself as a go-to wagering option for sports bettors. But achieving scale isn't cheap or easy, and as a result, the company continues to lose money on the bottom line. Investors will be much more secure when and if DraftKings proves it can consistently book profits.
