DraftKings shares are up 24%, according to a Wall Street analyst

Stock prices of DesignKings (NASDAQ: DKNG) have hit new highs in 2024 and improving near-term earnings results point to more new highs, at least according to analysts at Mizuho Effects.

Mizuho initiated coverage of the stock with a buy rating and a price of $58 price target, which represents an upside of 24% over the next twelve months from the current share price. This is why the company is bullish on the stock.

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The reason behind the call

Mizuho is pleased with the company’s leading edge, with a more than 30% share of the North American online market sports betting market. Importantly, this advantage allows DraftKings to win new customers without having to increase marketing costs and revenue. Marketing is proving to be a valuable lever to keep operating costs under control, which should lead to higher profits this year.

In the fourth quarter, the company’s net loss fell to $44 million from $242 million in the same quarter last year. Management is targeting positive free cash flow between $310 million and $410 million by 2024, which could be even more positive for the stock.

DKNG Sales and Marketing Expenses (% of Quarterly Revenues) Chart

Is DraftKings stock a buy?

It’s hard to say when (or if) DraftKings will reach the analyst’s $58 price target.

On the plus side, in addition to lower marketing costs relative to revenue, DraftKings can also leverage its games and content developed in-house, as it can monetize these assets without paying a third party any compensation. It seems there are several paths to becoming more profitable in the long term.

On the negative side, the stock is trading at an expensive valuation. However, there is plenty of room in the field of online gaming and sports betting…

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