By Dhirendra Tripathi
Investing.com – DraftKings (NASDAQ:DKNG) stock traded 0.2% higher in volatile trade Tuesday after a Wells Fargo (NYSE:WFC) analyst more than halved his target to $19.
The stock erased early losses and was up nearly 3% at one time before retracing. It touched a high of $17.87 after touching a low of $16.57 in the session underway today.
Analyst Daniel Politzer sees the stock at $19, down from his previous target of $41.
The stock had closed at $17.29 Friday, losing more than a fifth of its value after the sports betting firm added fewer customers in the fourth quarter than analysts estimated.
“Our downgrade is company specific and reflects our growing concern on DraftKings’ path to profitability given its fast-growing operating expenses (as opposed to external marketing/promotional spend, which have been a concern among investors). DraftKings’ implied 2022 operating expenditure will increase 60%+ year-on-year versus its expected around 49% revenue growth,” Politzer said in a note, according to StreetInsider.
The analyst expects DraftKings to see acceleration in contribution profit, although he believes it is difficult to model a scenario where the sports betting firm achieves positive full-year EBITDA before 2025.
The company nearly doubled its expenses on sales and marketing in the year to $982 million but managed an increase of just about 32% to 2 million monthly unique paying customers on average on the platform.
The numbers from the company were a surprise, given more states legalized sports betting this year and the firm spent a good part of its time tying up with various associations and sports bodies, including the National Football League, to entrench its sports betting services.