DraftKings Inc. (DKNG) is poised to make a strong showing in its upcoming third-quarter earnings report, according to Bank of America analyst Shaun C. Kelley, who has reiterated a Buy rating on the company with a $50 price target.
Kelley believes DraftKings has the potential to exceed expectations in its financial guidance, pointing to several key areas of opportunity.
DraftKings’ Growth Drivers:
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Revenue Expansion:
Kelley anticipates robust revenue growth for DraftKings, driven by increased hold, which he expects to keep pace with rival FanDuel’s 100 basis point year-over-year expansion.*
Promotional Spending Reduction:
The analyst also sees positive implications from DraftKings’ efforts to lower promotional spending, which could further boost profitability.Potential Headwinds:
While acknowledging the positive outlook, Kelley also identifies some potential challenges:
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App Download Slowdown:
The analyst notes a slower rate of app downloads, a trend he believes could impact user growth.*
Unfavorable NFL Outcomes:
Kelley highlights the impact of unfavorable NFL game outcomes on DraftKings’ recent performance, a factor he expects the company to address in its Q3 report.Focus on Q3 and 2025 Guidance:
The third-quarter earnings report is expected to provide an updated look at DraftKings’ full-year guidance and future 2025 financials. Kelley expects the company to reiterate its 2025 EBITDA guidance of $900 million to $1 billion and provide initial revenue guidance of $6.15 billion to $6.45 billion, representing an estimated 25% year-over-year growth and a 45% revenue-to-EBITDA flow-through.
DraftKings’ Stock Performance:
DraftKings’ stock closed at $36.56 on Monday, within its 52-week trading range of $26.35 to $49.57. The stock has seen a 9% year-to-date increase.
With the NFL season in full swing and key financial updates on the horizon, DraftKings’ upcoming earnings report is likely to be closely watched by investors and industry analysts.
