By Sam Boughedda
Argus upgraded DraftKings (NASDAQ:DKNG) to Buy from Hold with a $22 per share price target on Tuesday.
The upgrade follows the Massachusetts Gaming Board stating on February 23 that it had issued temporary sports-betting licenses to DraftKings and eight other companies.
Analysts told investors in a research note that as more states legalize online sports betting and consumers allocate more of their income to wagers, they expect DraftKings' revenue to increase to $3.1 billion in 2023 from $323 million in 2019.
"Tailwinds include market share gains, greater customer retention, and earnings growth in existing markets," the analysts wrote. "Given DraftKings' falling customer acquisition costs and ability to grow at 20% or higher over the next several years, we are confident in its long-term growth prospects."
"DKNG is trading at a price/sales multiple of 3.6, below the average of 7 for a basket of 'app economy' companies (PTON, ZM, TDOC, SHOP). However, we believe that this discount is unwarranted given the company's strong growth prospects and falling customer acquisition costs," they added.