Analysts at Bank of America have lowered their price target on Draftkings Inc (NASDAQ:DKNG) to $50 ahead of the fantasy sports contest and sports betting company’s second quarter earnings report, due on August 1 after the market close.
Shares of DraftKings traded hands at about $38 on Tuesday.
The analysts expect the company to report earnings before interest, taxes, depreciation and amortization (EBITDA) of $130 million for the quarter, compared to guidance of $150 million, reflecting unfavorable hold outcomes and higher customer acquisition.
Wall Street analysts, on average, expect DraftKings to report a loss per share of $0.02, an improvement from a loss per share of $0.17 in the year-ago quarter and an almost 30% jump in revenue to $1.1 billion for Q2.
Investors are likely expecting a Q2 miss, BoA analysts believe, but are expected to focus on DraftKings’ 2024 guidance, outlook for customer acquisition and its performance relative to competitor FanDuel.
“While DraftKings narrowed the hold gap to FanDuel in Q4 and Q1, the seasonal gap in Q2 was flat, suggesting DraftKings did not make as much progress this quarter, potentially due to FanDuel’s particular strength with the NBA,” they wrote.
Despite near-term pressure, the analysts remain confident in DraftKings’ ability to drive health flow-throughs and reiterated their ‘Buy’ rating on the stock.
“We think DraftKings is still well-positioned to execute during 2H and NFL season where it tends to excel, and see both easier hold comps ahead and strong handle share growth in Q2 as positive signs,” they wrote.