DraftKings suffers a setback in the fourth quarter as gamblers claim victories, according to an analyst at J.P. Morgan.
In a recent report, J.P. Morgan analyst Joseph Greff has recalibrated his fourth-quarter estimates for DraftKings, the popular online sports betting platform. At the time of the report, DraftKings was trading at $36.29 per share.
Greff's adjustments were modeled on the October adversity experienced by DraftKings. He trimmed his cash-flow projection by $100 million, revising it to $68 million for the last three months of 2024. Despite this, he maintains a solid liquidity position for the company, as the lower numbers are attributed to a string of unfavorable sports scores.
The saving grace of the fourth quarter, according to Greff, were operator-favorable outcomes in November. This has provided a solid foundation for the company's performance.
Despite the revised estimates, Greff remains optimistic about DraftKings' future. He forecasts the company's 2025 revenue to be around $6.4 billion, followed by $7.3 billion in 2026. These figures represent a 35% growth in 2025 and a 13% increase in 2026.
Greff also maintains a $53 per share price target on the stock, reflecting his positive outlook. He cites DraftKings' 'attractive revenue growth profile and an ability to leverage its scale and strong competitive position in the U.S.' as key factors in his continued Overweight rating on the stock.
Interestingly, Greff does not see excessive aggressiveness in DraftKings' longer-term financial forecasts extending into 2028. He deems DraftKings' desired profit margins feasible, despite the challenges faced in the fourth quarter.
In December, DraftKings was holding seven percent of all money wagered (handle) compared to 7.2 percent for its peers. This shows that the company is maintaining its market share despite the challenges.
However, Greff does not contemplate any repurchases of DKNG shares at this time. He notes that the company has $1.7 billion cash on hand and $500 million more available in a revolving line of credit, providing a strong financial position for potential future moves.
Despite the challenges faced in October, it seems that J.P. Morgan analyst Joseph Greff remains bullish on DraftKings' prospects. The company's resilience in the face of adversity and its strong financial position bode well for its future growth.
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