Draftkings Inc (NASDAQ: DKNG) has experienced a turbulent year of trading, gaining 28% over the past 12 months. The company officially listed as public company on the 24th of April, after merging with the SPAC Diamond Eagle Acquisition. DraftKings has re-entered Wallstreets spotlight after Hindenburg Research disclosed they had taken a short position in DraftKings stock. 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 DraftKings in 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, analysing a diversified range of targets from financial institutions is a tool investors can use to understand the “smart money” consensus on Wallstreet. The current consensus amongst analysts suggests an averaged buy rating. Across the board of 21 Wallstreet analysts, the average 12 month price target is $68.46 according to MarketBeat data. This suggests an upside potential of 39% at the time of writing. The higher end targets push as high as $87 a share and lower end targets of $42.50. Here are the latest targets from analysts:
Most recent and high impacting price targets from analysts
- Morgan Stanley 6/2/2021 – Analyst Thomas Allen lowered the firms 12 month price target to $58 a share while maintaining an Overweight rating.
- Argus 5/24/2021 – Analyst John Eade lowered the firms price target to $60 a share. The analyst noted “As more states loosen restrictions, we expect DraftKings to benefit from its market leadership. Investors have recognized the company’s potential, and the shares have outperformed since the company went public in April 2020” according to StreetInsider.
- Needham & Company 5/10/2021 – Analysts lowered the firms 12 month price target to $73 a share while maintaining a Buy rating.
The full picture from analysts on DraftKings stock forecast for 2021
The general trend in recent months has seen valuations lower as analysts maintain some caution on the markets current volatility. In addition, Morgan Stanley analyst recent lowered the firms price target due to a larger than expected increase in shares outstanding and a lower cash position. In saying this, majority of analysts including Morgan Stanley still maintain a Buy or Overweight rating on DKNG stock.
Revenue forecasts for DraftKings in 2021
In the first quarter of 2021, Draft Kings increased their 2021 revenue guidance to $1.05 Billion-$1.15 Billion. The increase in guidance stemmed from strong Q1 revenue results, with DKNG posting $312 Million (253% increase YOY). It is important the note accounts for all professional and college sport calendars that have been announced to come to fruition. This means any disruptions in college and professional seasons may have a direct influence on the guidance provided.
“Our $312 million in first quarter revenue, 114% increase in MUPs and 48% growth in ARPMUP reflect solid customer acquisition and retention as well as successful launches of mobile sports betting and iGaming in new states. We are raising our revenue outlook for 2021 due to the outperformance of our core business in the first quarter and our expectation for continued healthy growth.”Jason Park, DraftKings’ Chief Financial Officer
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 Vanguard with currently north of $1 Billion stake in the company. Vanguard have increased their holdings by 2.56% for this current quarter. The next two large institutional holders include Raine Capital & CO and Price T Rowe with $900 million and $820 million stake respectively. Out of all institutions holding DKNG, 444 increased their position while 260 decreased their position highlighting a surplus in institutional investment for the reported quarter.
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 possibility of another resurgence of COVID-19 in the United States. However, this threat looks less likely than it was 12 months ago due to the current vaccination rates across the US.
The Hindenburg Research article illustrated concerns regarding DraftKings promotional spending and the companies future in a competitive landscape. Hindenburg also highlighted concerns with DKNG’s merged company SBTech which allegedly generates revenue from questionable gambling practises overseas.
At this stage, DraftKings have responded noting they are comfortable with SBTechs practises and reaffirmed that Hindenburg has an incentive to drive the stock price down according to CNBC. In summary, the Hindenburg article did have an initial impact however the bulls drove the price back up gaining 9% over the past week of trading.
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 $68, there is still room for growth at the current price according to majority of analysts. The increased revenue guidance is another positive for long term investors to take away in 2021. Overall, this company has a strong outlook however unprecedented changes in the sporting environment may have the power to swing this stocks investor sentiment.
Written by Tyger Fitzpatrick, Founder of Youth Investment Group – For full disclosure to our viewers, the author of this article has a long term position in the stock.
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