M&A Activity Is on the Table for DraftKings in 2025, Deutsche Bank Says

Deutsche Bank analyst Carlo Santarelli has suggested that mergers and acquisitions would be a likely strategy for American betting powerhouse DraftKings in 2025. This comes amid suboptimal Wall Street projections for the company’s performance.

DraftKings Might Struggle to Hit the Mark

As reported by CDC Gaming Reports, Santarelli said that at the midpoint of DraftKings’ guidance for the year, the company would trade at 22x adjusted EBITDA with a 4% free-cash-flow yield. For context, the guidance for the company projects $900 million to $1 billion in revenue for 2025.

Santarelli noted that hitting the guidance would be key to boosting the company stock. Conversely, not delivering on these projections could cast further doubt on longer-term adjusted EBITDA targets.

M&A to Remain a Core Part of DraftKings’ Strategy

As mentioned, Santarelli believes that M&A activity could be a major driver for DraftKings’ business in 2025. The company has so far leveraged an aggressive acquisitions strategy, scooping up major competitors, such as Golden Nugget Online, the lottery giant Jackpocket, and a number of technology firms.

Given DraftKings’ track record of intense M&A activity, Santarelli expects this to remain a “key cog” in the company’s strategy into 2025 and 2026. He emphasized that such deals might help the company hit its revenue and EBITDA targets amid a variety of setbacks.

Speaking of his own projections, the analyst reiterated a Hold rating for the company stock, setting a $33 price target for its shares. The company’s shares are trading for $37.25 apiece at the time of this writing.

Santarelli’s price target is based on expectations for 17.5x the EBITDA forecast and the 2025 net cash projection of $17 billion.

Texas Could Boost DraftKings if Online Betting Is Introduced

In the meantime, Santarelli listed a number of new US markets in which DraftKings might be interested. Texas remains a standout as gaming companies hope to capitalize on its large population, should local legislative efforts yield results.

In the meantime, the Deutsche Bank analyst mentioned California and Florida as possible markets DraftKings might be interested in. However, he added that the local regulations, which would require the bookie to team up with local tribal entities, might be a put-off.

In the meantime, Santarelli also commented on the prospects of further iGaming legalizations across America, noting that Ohio and Maryland seem to be the most likely to pass a relevant measure. On the contrary, his team believes that New York and Illinois are the least likely to legalize online casinos.

Caesars in Favorable Position, Says Santarelli

The analyst recently disclosed his projections about one of DraftKings’ bigger competitors, Caesars Entertainment. His chief point was that Caesars’ shares are currently not properly valuated and that the company is doing better than might seem at first glance.

Santarelli pointed out that Caesars is likely to unlock new digital opportunities and see its recent land-based investments start to pay off.