On Monday, Susquehanna maintained a Positive rating on DraftKings Inc. (NASDAQ:DKNG) and increased the price target to $54 from $51. The revision reflects a positive outlook based on quarter-to-date state data through February.
DraftKings' revenue and EBITDA estimates for the first quarter of 2024, which suggest a 45% year-over-year revenue growth, are deemed conservative by the firm, especially considering March accounts for approximately 40% of the quarter's total.
The company has observed an impressive 80% growth in online sports betting (OSB) gross gaming revenue (GGR) across several states, including New Jersey, Pennsylvania, Indiana, Iowa, Michigan, Connecticut, New York, Kansas, and Maryland. Additionally, promotional spending as a percentage of GGR has decreased in four states with available data. For internet casino operations, DraftKings' GGR is up 37% year-over-year through February.
The analyst highlighted that, before March's figures are included, DraftKings' first-quarter 2024 revenue is trending 5% to 8% higher than previously expected. This uptick comes even before accounting for the impact of the recent launch in North Carolina on March 11, which is anticipated to contribute significantly to the company's spending and revenue.
Notably, management changes at DraftKings have also been pointed out as a significant development. Jason Park will now focus on the long-term margin profile of the company, while Alan Ellingson will take over as CFO. Ellingson previously led the financial planning and analysis and analytics departments. The firm believes that these changes further secure the potential long-term EBITDA margin profile for DraftKings, which is estimated to be around 30%, and may create additional upside potential.
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