Jefferies has upgraded its price target for Draftkings Inc (NASDAQ:DKNG) by $4 a share to $46.00, a 36% premium to the current share price.
This bullish stance comes in the wake of DraftKings' impressive third-quarter financial results, which saw the company's revenue surge to $789.9 million, marking 57.4% year-over-year growth.
The company's losses were also less severe than market analysts had predicted, with an adjusted EBITDA loss of $153.4 million, compared to the anticipated $219.3 million.
DraftKings reported a notable increase in monthly unique players (MUPs), a measure of active customers, which climbed 43.8% to 2.3 million. This growth outpaced both Jefferies' and Wall Street's expectations.
Reflecting confidence in its business model, DraftKings has raised its full-year 2023 revenue forecast to between $3.67 billion and $3.72 billion. The company also expects a reduced adjusted EBITDA loss for the same period.
Looking ahead, the gaming company has set an ambitious revenue target for the fiscal year 2024, aiming for $4.5 billion to $4.8 billion, with a positive adjusted EBITDA of $350 million to $450 million. This forward-looking guidance indicates the company's expectation of continued growth and profitability.
Jefferies has responded to DraftKings' strong performance and optimistic outlook by revising its own financial models.
The investment bank now projects that DraftKings will generate $3.687 billion in revenue with an adjusted EBITDA loss of $103 million for the fiscal year 2023. For the following year, Jefferies anticipates revenue to reach $4.711 billion and adjusted EBITDA to hit $469.1 million.
For the fiscal year 2025, Jefferies' projections are even more optimistic, with revenue expected to soar to $5.61 billion and adjusted EBITDA to more than double to $906.3 million.
The upgraded price target from Jefferies is based on a multi-stage Discounted Cash Flow (DCF) model, a valuation method used to estimate the value of an investment based on its expected future cash flows.
In morning trade, the stock was up 1.7% at $33.96.