- Morgan Stanley analyst Stephen Grambling reiterated an Overweight rating on the shares of DraftKings Inc (NASDAQ:DKNG) and raised the price target from $20 to $22.
- Meanwhile, the analyst removed the stock as Top Pick after an +80% move YTD (vs. +6% S&P 500, +28% gaming coverage).
- DraftKings saw 11 states turn contribution profit positive this year and that should grow, said the analyst.
- The company’s parlay mix improved hold by ~70 bps y/y in FY22. Continued focus on parlays should drive even higher mix in the future and support structurally higher margins, added the analyst.
- With DKNG moving closer to profitability, the analyst believes the company’s NOL will start being ascribed value by the market.
- The analyst raised estimates to reflect DKNG’s 4Q beat, structurally better hold, and better cost control.
- The new 2023 revenue estimate moves to $3.121 billion (versus $3.052 billion prior), which remains above the high end of guidance as the analyst anticipates stronger new state results and potential for further improvement in parlay mix & hold.
- The analyst leans toward the high end of 2023 guidance and anticipates above consensus 2024 based on the state-by-state build.
- Also Read: DraftKings 3.0: Analysts Raise Price Targets After Q4 Beat, Focus On Profitability
- Price Action: DKNG shares are trading lower by 1.60% at $19.64 on the last check Wednesday.
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