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The stock of DraftKings (NASDAQ: DKNG) saw a robust 26.69% gain this week, bringing its year-to-date increase to 196.31%. Macquarie analyst Chad Beynon has labeled DraftKings as the best way to invest in the online gaming market. Beynon reiterated an “outperform” rating and raised the price target to $42 from $38, indicating a potential upside of 24.44% from the previous closing price of $33.75.
DraftKings’ strong earnings before interest, taxes, depreciation, and amortization (EBITDA) for the remainder of 2023 and 2024, along with its leadership in domestic internet gross gaming revenue (GGR), propelled the stock to pop 16.46% after the operator delivered its third-quarter results.
Beynon wrote, “DKNG reported another strong revs/EBITDA beat and raise in 3Q, driven by OSB/iGaming share gains as the operator took the pole position for US Online GGR in 3Q.”
Along with the favorable earnings, DraftKings forecasted a 2023 EBITDA loss of $105 million on revenue of $3.695 billion, an improvement from prior estimates. For 2024, the company expects an EBITDA of $350 million to $450 million on sales of $4.5 billion to $4.8 billion.
In light of this guidance, Beynon increased revenue estimates for 2023 through 2025, stating that DraftKings’ tradition of surpassing expectations could align with his bullish outlook for the company.
Beynon emphasized DraftKings’ first-mover advantage, strong brand recognition with the younger demographic, and superior technology as reasons why DraftKings and rival FanDuel have established themselves as leaders in the U.S. online sports wagering space.
Despite DraftKings being only three and a half years into its journey as a publicly traded company, Beynon believes the company is just beginning to tap into the benefits of national scale and will continue to deliver double-digit revenue growth. Beynon also noted DraftKings’ potential to protect its leadership position by reinvesting in its business and technology.