Goldman Sachs started off coverage on DraftKings (NASDAQ:DKNG) on Tuesday with a Buy rating.
Analyst Ben Miller and his team expect DraftKings (DKNG) to compound revenue at a clip of over 20% as the sports betting giant continues to benefit from healthy growth in existing states, as well as future state legalization across online sports betting and iGaming. In addition, DraftKings (DKNG) was noted to be seeing improving unit economics. Looking ahead, Goldman Sachs sees upside to the current consensus estimates on DraftKings' (DKNG) 2024-2025 revenue and adjusted EBITDA tallies, which would help tamp down the argument that shares are overvalued.
"While the stock is up ~65% over the past 9 months, DKNG is trading at a growth adjusted revenue multiple of 0.15x (vs. its historical average of 0.19x and peers currently trading at 0.17x), which is down ~20% over the same time period."
Goldman Sachs assigned a price target of $60 to DraftKings (DKNG) based on an equal blend of a 5.5X EV/revenue multiple applied to the firm near-term estimates and 20.0X EV/GAAP EBITDA multiple applied to the longer-term estimates discounted back three years at 12%.
Shares of DraftKings (DKNG) poked out a 0.71% gain in premarket action on Tuesday to $44.03. The 52-week high for the sports betting stock is $49.57.