DraftKings Maintains Hold Rating Amid Earnings Beat and Raised Guidance

In a report released today, Carlo Santarelli from Deutsche Bank maintained a Hold rating on DraftKings (DKNG – Research Report), with a price target of $34.00.

Carlo Santarelli has given his Hold rating due to a combination of factors related to DraftKings’ performance and market expectations. DraftKings reported first-quarter earnings that were better than both the guidance and consensus, with an EBITDA significantly higher than expected. However, this positive result did not come as a surprise, as the company has a history of surpassing guidance and consensus estimates. Additionally, the company has raised its revenue and EBITDA guidance, even in the face of certain challenges, such as hold headwinds, which have only modestly offset the net revenue expansion.

The Hold rating also takes into account the management’s comments on structural hold percentages and their anticipated increase in the coming year. While the exact hold for the period was not explicitly referenced, there is an expectation of a gradual increase to a structural hold percentage of around 10.5% moving into 2025. Given the recurring nature of discussions around hold dynamics in the gaming industry, Santarelli seems to suggest that the market has already priced in the consistent EBITDA beats and guidance increases. As a result, the upcoming conference call is likely to play a significant role in DraftKings’ short-term stock movement, underlying the rationale for the Hold rating.

Santarelli covers the Consumer Cyclical sector, focusing on stocks such as Caesars Entertainment, MGM Resorts, and Penn National Gaming. According to TipRanks, Santarelli has an average return of 18.9% and a 58.91% success rate on recommended stocks.

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DraftKings (DKNG) Company Description:

DraftKings is a leading gaming and digital sports entertainment company. It offers a wide range of online products, including sports betting (known as “Sportsbook”), online casino games (“iGaming”), and daily fantasy sports (“DFS”). Additionally, it provides retail sportsbook services, media content, and various consumer products. It also designs and develops software for sports betting and casino gaming.