UBS maintains Buy rating and $58 target on DraftKings stock

UBS maintained a Buy rating on DraftKings (DKNG) with a $58 price target, citing expected revenue growth of 32% this fiscal year despite a projected slowdown in betting handle growth in Q2 due to reduced promotional activity. DraftKings' Q1 revenue increased 20% year-over-year to $1.409 billion, but fell short of some estimates, leading to revised 2025 revenue and adjusted EBITDA forecasts; however, analysts from Benchmark, Macquarie, TD Cowen and Stifel remain positive, citing strong user engagement and product improvements, while Guggenheim revised its price target to $60.

Analysis

UBS analyst Robin Farley has maintained a Buy rating and a $58.00 price target for DraftKings Inc. (NASDAQ:DKNG), reflecting confidence despite acknowledged short-term headwinds. DraftKings, with a $17.4 billion market capitalization, has demonstrated robust past performance, evidenced by 23% revenue growth in the last twelve months, and analysts anticipate a 32% revenue growth in the current fiscal year. Concerns regarding slowing betting handle growth for DraftKings and competitor FanDuel (FLUT) are attributed by Farley to a strategic reduction in less profitable promotions and the natural maturation of newly legalized states; a lower handle growth is expected in Q2, followed by an anticipated acceleration in H2. DraftKings' strategy involves enhancing its parlay offerings, estimated at a 30% mix (potentially 7 percentage points below FanDuel's), and expanding live betting options, which, despite lower hold rates, have shown substantial growth over the past six months and contribute positively to revenue. The company's Q1 revenue rose 20% year-over-year to $1.409 billion, missing some estimates, while Q1 EBITDA of $103 million surpassed consensus but not Guggenheim's projection. Consequently, DraftKings revised its 2025 revenue and adjusted EBITDA forecasts downward, citing unfavorable NCAA Men's Basketball Tournament outcomes. Despite this, Monthly Unique Payers grew 26% year-over-year to 4.3 million. The company operates with moderate debt and a healthy current ratio of 1.2, and analysts expect it to achieve profitability this year. Other analyst firms, including Benchmark (PT $45), Macquarie (PT $53), TD Cowen (PT $53), Stifel (PT $53), and Guggenheim (PT $60), also maintain generally positive outlooks, citing strong user engagement, product improvements, and cost discipline.

Key Decisions for Investors

• Investors should consider the maintained Buy rating and $58 price target from UBS, alongside positive outlooks from other analysts, which suggest potential upside for DraftKings (DKNG) despite recent forecast revisions.
• Monitor key performance indicators in the coming quarters, particularly the betting handle growth in H2, the company's progress in increasing its parlay mix, and the revenue contribution from its expanding live betting segment, as these are critical to achieving its growth targets.
• Track DraftKings' path to profitability, expected this year, as this will be a significant catalyst; also note the impact of promotional strategies on short-term handle and revenue, and the competitive dynamics with FanDuel.
• Evaluate the company's ability to balance growth initiatives, such as live betting expansion with lower hold rates, against the need for sustained revenue and EBITDA improvement, especially in light of revised 2025 guidance.