On Friday, JPMorgan (NYSE:JPM) updated its financial outlook for DraftKings Inc. (NASDAQ: NASDAQ:DKNG), raising the price target to $53.00 from the previous $47.00. The firm maintained its Overweight rating on the stock, expressing confidence in the company's revenue growth and market position. Currently trading at $41.47, DraftKings has shown strong momentum with a 17.65% return year-to-date. According to InvestingPro data, analyst targets range from $33 to $77, reflecting the stock's volatile nature.
The analyst from JPMorgan highlighted DraftKings' potential for revenue expansion and operational efficiency. This optimism is supported by the company's impressive 40% revenue growth over the last twelve months, as reported by InvestingPro. According to the firm, DraftKings is well-positioned to capitalize on its scale and competitive edge within the U.S. online sports betting (OSB) and iGaming markets. These factors are expected to contribute to better margins, EBITDA, and free cash flow in the future.
JPMorgan's revised price target is based on projections for the years 2025 and 2026. The firm forecasts that DraftKings will achieve revenues of $6.4 billion in 2025 and $7.26 billion in 2026. This represents year-over-year growth of 31% and 13%, respectively. Moreover, the analyst anticipates that the adjusted EBITDA for DraftKings will reach $950 million in 2025 and increase to $1.46 billion in 2026, with margins improving to 15% and 20% in these years, respectively.
The analyst's statement emphasized the belief in DraftKings' ability to leverage its scale and strong competitive position to optimize operating expenses. This optimization is expected to lead to enhanced margins and create more robust EBITDA and free cash flow streams.
The updated analysis by JPMorgan reflects a positive outlook for DraftKings, underlining the company's strategic advantages and potential for financial growth in the coming years. The Overweight rating suggests that JPMorgan views the stock as a good investment with expected performance above the average of the sector in the near future.
Based on InvestingPro's Fair Value analysis, the stock appears slightly undervalued. Subscribers can access 10 additional ProTips and a comprehensive Pro Research Report, offering deeper insights into DraftKings' financial health and growth prospects.
In other recent news, DraftKings reported substantial revenue growth of 39% year-over-year, reaching $1.95 billion, despite a $59 million adjusted EBITDA loss. The company's future outlook includes generating approximately $850 million in free cash flow in fiscal year 2025, with revenue guidance set between $6.2 billion and $6.6 billion, and adjusted EBITDA guidance ranging from $900 million to $1 billion. Analyst firms BTIG, TD Cowen, and Goldman Sachs (NYSE:GS) have maintained their Buy ratings on DraftKings, with price targets at $55 and $57 respectively.
DraftKings continues to see robust new customer acquisition trends and is working to increase profitability and Free Cash Flow (FCF) conversion. The company's plans also include enhancing its live betting offerings by integrating Simple Bet and increasing its parlay mix during the NFL season. Despite these developments, DraftKings maintains a cautious outlook on customer acquisition spending due to a competitive environment.
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