DraftKings (DKNG 4.96%) stock doubled in value over the last 12 months but may still offer upside, according to analyst Barry Jonas at Truist. Jonas was one of several analysts that raised their price targets recently and now sees the stock reaching $55 in the near term. This would represent 35% upside from its closing price on Thursday.
The stock fell after DraftKings reported fourth-quarter financial results last week. But improving profitability and continued revenue growth could make the dip a buying opportunity.
Improving profitability is a key catalyst for DraftKings
DraftKings is going after a sizable market opportunity for online sports betting, and its latest results showed it is also gaining share of a growing market. Revenue grew 44% year over year, despite the company taking a hit from an unfavorable stretch of betting outcomes in the quarter.
Most importantly, as revenue continues to grow, the company is inching closer to breakeven. DraftKings reported a net loss of $44 million last quarter, a significant improvement over a $242 million net loss in the year-ago quarter. The company's profit margin is still at negative 22%, but it's starting to narrow rapidly, even as management invests in improving the customer experience.
Why buy DraftKings stock?
The recent market share gains are encouraging and show DraftKings could have a prosperous decade ahead. At last year's investor day, management said it expects it's addressable market to expand from $20 billion to $30 billion by 2028.
The strong performance on the bottom line in a quarter where it experienced customer-friendly betting outcomes shows it is ahead of schedule in reaching breakeven. This is why Wall Street remains bullish on this sports betting stock after such a big run last year and still offers long-term upside for investors.
