Citizens reiterates DraftKings stock rating despite expected weak quarter

Citizens maintained its "Market Outperform" rating and $51 price target on DraftKings (DKNG), anticipating a "fairly negative" upcoming quarter with expected revenue misses and reduced 2025 guidance, yet viewing the current valuation as a buying opportunity. This comes as DraftKings expands into prediction markets via its Railbird Technologies acquisition, while also navigating account breaches from credential stuffing attacks. Other firms like Berenberg and Mizuho offer mixed analyst sentiment, with Berenberg upgrading to Buy and Mizuho maintaining Outperform.

Analysis

Citizens maintains a "Market Outperform" rating and a $51.00 price target on DraftKings (DKNG), despite forecasting a "fairly negative quarter" with anticipated revenue shortfalls and reduced 2025 guidance. The firm views the current trading price of $33.62 as an "additional buying opportunity," based on DKNG trading at less than 10 times consensus 2027 estimated EBITDA. This $51 target incorporates a blended valuation using 15x 2027 estimated EBITDA and 17x 2026-2027 projected free cash flow.

Analyst sentiment is mixed, with eight firms recently revising earnings estimates downward. Berenberg upgraded DKNG to Buy, albeit with a lowered price target of $43.00, while Mizuho maintained an Outperform rating with a $54.00 price target. This divergence reflects varied perspectives on the company's near-term challenges versus its long-term growth trajectory.

DraftKings is strategically expanding into prediction markets via its acquisition of Railbird Technologies Inc. and the upcoming launch of the DraftKings Predictions app. Concurrently, the company is managing operational risks, including recent account breaches from credential stuffing attacks detected on September 2. These developments highlight both growth initiatives and ongoing security concerns.

Key Decisions for Investors

• Investors should closely monitor the upcoming Q3 earnings report and 2025 guidance for confirmation of anticipated revenue misses and reduced outlook, which could impact near-term stock performance
• Evaluate the long-term growth potential from DraftKings' expansion into prediction markets against the operational risks posed by recent cybersecurity incidents and potential near-term slowing growth
• Consider the divergence in analyst price targets and valuation methodologies, performing independent due diligence on the implied risk-reward given the mixed outlook