Draftkings Inc (NASDAQ: DKNG) has seen a brilliant year debuting on the NASDAQ, posting an impressive 314% gain. The company officially listed on the 24th of April, after merging with the SPAC Diamond Eagle Acquisition. DraftKings has re-entered Wallstreets spotlight this week as the company released their Q3 earnings this morning and recently received an upgrade buy rating from analysts at Oppenheimer. This article will breakdown everything investors need to know about DraftKings forecast for 2021 and beyond.
Table of contents
- What are analysts forecasting for DKNG moving into 2021?
- Revenue forecasts for 2021
- A glimpse into the institutional holdings for DraftKings
- The risk associated with DraftKing stock moving into 2021
- Summary on DraftKings stock forecast moving into 2021
What are analysts forecasting for DKNG moving into 2021?
Firstly, researching the analysis from a diversified range of institutions should always be a part of an investors due diligence. The current consensus amongst analysts suggests an averaged buy rating. Across the board of 21 Wallstreet analysts, the average 12 month price target is $54.76. This suggests an upside potential of 25% at the time of writing. The higher end targets push as high as $76 a share and lower end targets of $34. So what do these price targets translate for investors?
The general sentiment across the board of analysts is bullish. The average price target is calculated across 21 different institutions which provides greater insight than similar high growth stocks trading on the NASDAQ. However, these price targets are updated regularly and its important keep up to date regarding the most recent targets and their impact on the stock price.
Most recent and high impacting price targets from analysts
- 11/04/2020 – Oppenheimer reiterates buy rating with price target at $65 a share.
- 10/12/2020 – Credit Suisse AG initiâtes outperform rating and price target of $76 a share.
- 10/12/2020 – Deutsche Bank initiates hold rating and price target at $46 a share.
- 10/08/2020 – Cowen initates a market perform rating and price target of $55 a share.
- 09/30/2020 – Needham & Company LLC imitates a buy rating and price target at $70 a share
- 08/28/2020 – Morgan Stanley downgrades from overweight to Equal weight and a price target downgrade to $37 a share.
All data obtained from the MarketBeat data base. See here for more information.
The full picture from analysts on DraftKings stock forecast for 2021
The general trend in recent months, as seen in the price targets above is a stronger movement to $60-$65 a share in 12 months. However, its not all uphill from here. Larger institutions are still generally more conservative regarding the long term outlook. The downgrade from analyst Thomas Allen at Morgan Stanley advised in a client note
“with numerous peers raising capital and operators looking to take first-mover advantage, so near-term losses could be much higher than expected.” He added that “While we think a lot of the increased value is valid, we are concerned investors’ expectations are too high.”See source here Yahoo Finance – “Morgan Stanley Downgrades DraftKings On Competitive Headwinds”
Revenue forecasts for 2021
In the earnings call released this morning, Draft Kings posted impressive revenue guidance for 2021. The company forecasts revenue between $750 – $850 million for 2021. This will translate a 45% increase in revenue in comparison to 2020 earnings. This guidance is extremely bullish, suggesting the company is confident in its direction moving into 2021. These forecasts however follow some assumptions that must be met to hold true. The assumptions surrounding these predictions for 2021 include:
” in particular that all professional and college sports calendars that have been announced come to fruition, including the commencement of their 2020 to 2021 seasons, and that we continue to operate in states in which we are live today.”Global News Wire, press release from DraftKings 13/11/2020
A glimpse into the institutional holdings for DraftKings
Institutional holdings are also another key aspect in doing the correct due diligence on an equity investment. The largest institutional holding for DraftKings is BlackRock Inc with currently just under $250 million stake within the company. BlackRock had decreased their holdings by 3.3% for this current quarter. The next two large institutional holders include Lord Abbett & CO and Neuberger Berman Group with $94 million and $84 million stake respectively. The quarterly change in ownership has increased for both institutions – 17% and 35%. The increase in stake from both institutions is a positive sign for investors moving into 2021.
The risk associated with DraftKing stock moving into 2021
As directly mentioned by DraftKings, the 2021 revenue guidance is based upon the continuation of college and professional sport in the US. The associated risk comes with the increasing COVID rates across the country. The current cases in the US has continued to grow at a steady pace and continues to pose a threat to US sport. However, as seen in Australia we have just completed a full season of Australian rules football as well as rugby via a players bubble (seperate athletes from the general public for the season). If the US can contain the virus to the point where they can successfully Quarantine the players for the season, then this will obviously have a huge impact for DraftKings. It can be done, but the NFL in particular will need to push a strict and dynamic approach. This impact will directly impact DraftKings revenue for 2021.
Summary on DraftKings stock forecast moving into 2021
In conclusion, the general board consensus amongst analysts is bullish in long term outlook. With an average price target at $54, there is still room for growth at the current price according to analysts on average. The revenue forecasts look strong however the external environment of COVID-19 in the US remains the priced in risk for this stock. Overall, this company has a strong outlook for 2021 however unprecedented changes in the sporting environment have the power to swing this stocks investor sentiment.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.