Amidst the widespread enthusiasm surrounding DraftKings Inc.’s stock, one analyst stands out with a contrasting perspective. In a recent report, Edward Engel from Roth MKM reiterates his bearish view on DraftKings (DKNG) shares, citing potential setbacks due to increased promotional activity within the online sports-betting industry.
While some analysts believe that the most recent quarter witnessed a decline in promotions, Engel argues that DraftKings actually intensified its promotional efforts during the June period. This raises concerns about the company’s upcoming earnings and the limitations it may face despite its Major Baseball League offering driving summer market share.
Engel expresses further worries regarding consensus expectations for next year, considering the aggressive promotional trends that may impede DraftKings’ expansion in net and gross gaming revenue. He mentions that forecasts for 2024 appear overly optimistic, especially with the potential disruption of market share from new entrants like Fanatics.
Despite raising his price target for DraftKings shares to $20 from $18 to account for the anticipated launch of the North America market in Q1 2024, Engel maintains a sell rating on the stock. He believes that “negative catalysts,” such as competition from Fanatics, outweigh any potential upside to Draftkings’ earnings and valuation.
DraftKings shares have seen an impressive surge of 175% throughout 2023, with their value hovering just above $31 during Tuesday afternoon’s trading session.