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DraftKings Is Questioned by the Market. Citi Says the Stock Is a Buy.

Citi analyst Jason Bazinet gives DraftKings a $24 price target.

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Gabby Jones/Bloomberg

DraftKings
does not get enough credit from the market, says one
Citi
analyst, who is a buyer of the sports betting company’s stock and has confidence in its “long-term prospects.”

Citi analyst Jason Bazinet maintained his Buy rating of
DraftKings
(ticker: DKNG) and $24 price target. In a research, he cited note growth potential as a reason for his bullish view on the stock, which he views as having a compelling “risk-reward.” He added that DraftKings remains on track to hit its long-term goals.

Bazinet’s bullish comments about DraftKings come after the stock tumbled 54% this year. Back in November, the company changed its forecast for adjusted earnings to a narrower loss, which sounds like good news.

However, analysts, like
J.P. Morgan
‘s Joseph Greff said that the guidance was still disappointing compared to competitors “and suggests that DraftKings is lagging peers.”

But Bazinet thinks the market is “not giving DraftKings credit.” He cites management comments from the recent earnings call that customer acquisition costs were down 10% year-over-year. He also believes DraftKings total addressable market estimate “is tracking ahead of the company’s estimate.”

“If legalization trends continue at the 2018-2021 cadence, we would expect DraftKings to reach its long-term targets by 2033,” he wrote. DraftKings management said in its latest earnings call that the company is live with mobile sports betting in 18 states that collectively represent 37% of the U.S. population.

“The market appears to be more skeptical about the firm’s long-term prospects. We remain optimistic and are buyers at current levels,” Bazinet said. And he is not the only analyst who is optimistic about DraftKings. Of the 31 analysts surveyed by FactSet, 17 say the stock is a Buy, 12 say it’s a Hold and two say it’s a Sell.

Shares of DraftKings were down 0.6% in premarket trading Friday to $12.53.
S&P 500
futures were down 0.9%.

Write to Angela Palumbo at angela.palumbo@dowjones.com

Credit: marketwatch.com

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