Posted on: June 26, 2020, 12:54h.
Last updated on: June 26, 2020, 02:35h.
Even while it’s experiencing its worst week as a publicly traded company, DraftKings (NASDAQ:DKNG) continues luring bullish commentary from sell-side analysts. Rosenblatt Securities is launching coverage of the sportsbook operator with a “buy” rating and a Wall Street high price forecast of $60.
The research firm announced the initiation and price projection Thursday after the close of US markets. But DraftKings is trading lower by 7.65 percent at this writing, putting shares of the daily fantasy sports (DFS) juggernaut on pace for a weekly loss of almost 12%, the worst five-day showing since the April 24 initial public offering.
The stock is being pummeled following filings revealing a raft of insider selling, including massive off-loading of shares by co-founders Jason Robins, Matthew Kalish, and Paul Liberman, as well as board member and SBTech founder Shalom Meckenzie. Despite those transactions, Rosenblatt believes DraftKings will flex its muscles in the sports wagering arena.
As the gambling industry in the US is emerging, we believe online players will take the dominant share and DKNG should be a leader,” said the brokerage firm.
Rosenblatt starting coverage on DraftKings caps a busy week of analyst action on the name. Earlier this week, Canaccord Genuity analyst Michael Graham boosted second-quarter revenue estimates on the company, while Goldman Sachs lifted its price target on the stock to $34 from $32.
Could Hit a Triple
Rosenblatt echoes the refrain of every other brokerage firm that’s launched coverage of DraftKings over the past two months: the return of sports following the coronavirus shutdown and increased state-level legalization of online and sports wagering are catalysts for the name.
“Near-term catalysts to own the stock now are the return of live sports and the potential acceleration of gambling legislation from COVID-19. In our bull case, we believe the stock can triple,” according to the research firm.
Based on Thursday’s close around $36, a triple from there would take DraftKings stock to $108. That far exceeds the previous rosiest forecasts calling for the name to run to $75 or double over the next several years.
Even the $60 projection far outpaces the Wall Street consensus of $46.44. With Rosenblatt joining the party, 11 analysts now cover DraftKings – nine with the equivalents of “buy” and “strong buy” ratings and two with “neutral” grades.
Another reason for the slide in DraftKings stock this week is an uptick in coronavirus cases, which threatens to delay the return of some professional sports.
Florida, where the NBA is slated to resume its season next month, is one of the states hardest hit by the second wave of the pandemic. California and Texas, the two largest states and homes to dozens of professional franchises across all four major US leagues, are also experiencing spikes in daily COVID-19 case counts.
The second round of cases is also stoking uncertainty regarding the fate of college football in 2020 and whether or not the NFL will start on time. Football is the most-bet sport in the US, and scrapping either the college or pro seasons would be a drag on online sports betting equities, including DraftKings.
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