Jefferies has commented on DraftKings (DKNG, Financial) after the company adjusted its fiscal 2025 guidance, describing the move as anticipated and a significant milestone. According to the firm, the revised outlook was influenced solely by customer outcomes witnessed in March, and prevailing concerns from analysts are considered to be largely insignificant.
Of particular note is the potential for in-play betting to boost DraftKings' handle growth more effectively than its competitors, as highlighted by the analyst. Despite the recalibrated guidance, Jefferies maintains a Buy rating on DraftKings, setting a price target of $60 for its shares.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 33 analysts, the average target price for DraftKings Inc (DKNG, Financial) is $53.38 with a high estimate of $75.00 and a low estimate of $35.00. The average target implies an upside of 47.34% from the current price of $36.23. More detailed estimate data can be found on the DraftKings Inc (DKNG) Forecast page.
Based on the consensus recommendation from 33 brokerage firms, DraftKings Inc's (DKNG, Financial) average brokerage recommendation is currently 1.8, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for DraftKings Inc (DKNG, Financial) in one year is $60.90, suggesting a upside of 68.09% from the current price of $36.23. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the DraftKings Inc (DKNG) Summary page.
DKNG Key Business Developments
Release Date: May 09, 2025
- Revenue: $1.409 billion in Q1 2025, 20% year-over-year growth.
- Adjusted EBITDA: $103 million in Q1 2025.
- Sportsbook Handle: $13.9 billion, 16% year-over-year increase.
- Structural Sportsbook Hold Percentage: 10.4%, up 60 basis points year-over-year.
- Actual Sportsbook Hold Percentage: 9.5%.
- Adjusted Gross Margin: Increased over 100 basis points year-over-year to 45%.
- Fiscal Year 2025 Revenue Guidance: Revised to $6.2 billion to $6.4 billion.
- Fiscal Year 2025 Adjusted EBITDA Guidance: Revised to $800 million to $900 million.
- Expected Sportsbook Net Revenue Margin: 7% to 7.5% for fiscal year 2025.
- Expected Adjusted Gross Margin: 46% for fiscal year 2025, an improvement of over 300 basis points year-over-year.
- Free Cash Flow Expectation: Approximately $750 million for fiscal year 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DraftKings Inc (DKNG, Financial) reported a strong start to the year with core value drivers outperforming expectations.
- The company achieved a 20% year-over-year revenue growth in the first quarter, generating $1.409 billion.
- DraftKings Inc (DKNG) has a healthy balance sheet with $1.1 billion in cash after repurchasing 3.7 million shares.
- The company is realizing efficiencies as broader corporate demand softens, particularly in advertising.
- Live betting has become a significant growth driver, with live handle exceeding 50% of total handle for the first time.
Negative Points
- Customer-friendly sport outcomes, particularly during March Madness, negatively impacted revenue and adjusted EBITDA.
- DraftKings Inc (DKNG) revised its fiscal year 2025 revenue guidance downward due to unfavorable sport outcomes.
- The company faces headwinds from increased tax rates in Maryland and the shutdown of digital lottery operations in Texas and New Mexico.
- There is concern over the gap between structural and actual hold percentages, attributed to random sport outcomes.
- DraftKings Inc (DKNG) is cautious about international expansion, focusing primarily on the U.S. market due to high opportunity costs.
