Shares of DraftKings (NASDAQ: DKNG) closed slightly lower today, but analysts are still optimistic about the stock’s potential in the second half of 2024. Stifel analyst Jeffrey Stantial recently rated DraftKings as a “buy” with a price target of $50, representing a 34.8% upside from the current price. Despite facing challenges such as a tax increase in Illinois, Stantial believes that the stock is a top pick for the remainder of the year.
The recent tax hike in Illinois has impacted online sports betting operators, including DraftKings, which now faces higher taxes in the state. However, Stantial believes that these headwinds have been accounted for in the stock price, and the company’s core growth drivers show potential for upside in the future.
One key metric that analysts and investors will be watching closely is DraftKings’ free cash flow, which has shown improvement over the past few quarters. While the company has been free cash flow negative in the past, there is optimism that this trend could reverse soon. Stantial suggests that DraftKings may announce a return of capital to shareholders in the near future, signaling confidence in future cash flow generation.
Despite the overall slow state-level expansion of online sports betting and iGaming in 2024, DraftKings has seen growth in market share in certain states. The company’s focus on user acquisition and monetization has led to an increase in online sports betting handle growth, with DraftKings gaining market share in recent months.
Stantial also points out that many new DraftKings customers are casual bettors, which could lead to higher returns for the company. While there may be some challenges ahead, such as potential competition and regulatory changes, DraftKings remains well-positioned to capitalize on the growing online sports betting market.
Overall, analysts are bullish on DraftKings’ prospects for the second half of 2024, citing potential for growth in market share, improved free cash flow, and a possible return of capital to investors. Despite facing challenges in the regulatory environment, DraftKings’ strong fundamentals and strategic focus position the company for success in the coming months.
