JP Morgan Highlights DraftKings’ Growth Prospects

Across the United States, DraftKings currently holds a leadership role in a number of markets. As one of the two major operators in the country that hold an overwhelming majority of the market share, the company constantly grows its presence and customer base.

This ongoing growth did not go unnoticed with one industry expert confirming a raise for the projected revenue DraftKings is expected to report for the second quarter of the year. As announced by CDC Gaming, JP Morgan’s expert analyst, Joseph Greff, recently updated his revenue projection for the company’s Q2 performance.

Initially, the expert projected a revenue of $1.09 billion for the second quarter. However, amid the growth of the number of DraftKings customers, Greff updated his projection, raising it by $200 million to $1.1 billion.

Besides the projection for DraftKings’ Q2 revenue, the expert reiterated the operator’s overweight rating. Greff did not change the set $56 price target per share.

Although the JP Morgan analyst raised the revenue expectation for the second quarter, he also acknowledged that DraftKings is likely going to spend more on customer acquisition. Previously, Greff predicted $150 million in cash-flow for the company, a figure that was decreased based on the recent projection by $40 million to $110 million for the second quarter of this year.

Recently, Morgan Stanley predicted that a buyback announcement may boost DraftKings’ shares. The experts highlighted the strong start of the year for the company which comes ahead of a potential strategic buyback announcement.

DraftKings to Overcome Near-Term Challenges in Illinois

The JP Morgan analyst expert highlighted challenges such as the low hold DraftKings reported for the US Open golf tournament. On the bright side, Greff noted the high hold reported by the company for the MLB and the playoffs of the New York Rangers and New York Knicks.

Another important topic discussed by the expert involved the increase in online sports betting taxes in Illinois. He said that the change doesn’t give DraftKings or other betting operators enough time to “mitigate near-term profit impacts.”

Despite the potential near-term impact on profits in Illinois, Greff said that he “largely” supports his predictions for DraftKings’ performance in 2025 and 2026. He said that by that time, the company would have found a way to mitigate the impact of the higher taxes. “We think it’s more likely than not that DKNG implements a sizable, multi-year, share-repurchase authorization, given its growing cash balance and path to improving profitability,” pointed out the JP Morgan analyst.

Recently, JMP Securities released its latest sports betting report, covering activities across the country in May. In its report, the equity research specialist highlighted that DraftKings cannibalized Fanatics’ market share last month.

While in April, DraftKings, together with FanDuel, held approximately 84% of the gross gaming revenue within the betting sector, a slight dip was observed in May. The collective GGR share of the two operators last month was 81%.