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HomeMarketDraftKings Falls on Analyst Downgrade. It's all About Its Outlook.

DraftKings Falls on Analyst Downgrade. It’s all About Its Outlook.

DraftKings had raised its financial forecast for the full year on Nov. 4 and a Piper Sandler analyst initiated coverage on the stock with Overweight soon after.

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Scott Olson/Getty Images

DraftKings
was falling Monday following a downgrade from
J.P. Morgan.

Analyst Joseph Greff lowered his rating on the stock to Underweight or a Sell equivalent from Neutral earlier. He kept his $12 price target unchanged.
DraftKings
(ticker: DKNG) was down 5.3% to $14.34 on Monday’s premarket trading.

The sports betting company raised its financial forecasts for 2022 earlier this month and reported a narrower-than-expected loss for the third quarter. Shares have rallied since then, up about 33%. But Greff was focused on the size of the future loss. Management’s 2023 adjusted Ebitda loss projection is $575 million and $475 million, worse than his prediction of roughly $350 million.

It rang alarm bells for Greff when compared to rivals.
Caesars Entertainment
(CZR) has said ts digital segment will be a positive “contributor as we move forward” while MGM in a September conference call said that BetMGM should reach profitability by the end of 2023.

“We now see downside to our unchanged $12 price target” given shares have moved up since the third quarter earnings report, the analyst said in his note. “We think DKNG’s path to [online sports betting] profitability is longer than peers.”

The company didn’t immediately respond to Barron’s recent request for comments on Greff’s downgrade.

Greff’s bearish view comes after
Piper Sandler
‘s Matt Farrell called DraftKings a leader a little over a week ago. He initiated his coverage of the stock at Overweight and believes the “steady cadence of legalization” of sports betting will prove as a vehicle for growth.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.

Credit: marketwatch.com

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