Credit Suisse announced this morning it is beginning analyst coverage of sports betting enterprise DraftKings (DKNG 0.59%) for the first time, according to a report by Seeking Alpha. The bank's research note said, "We initiate coverage of DraftKings with an Outperform Rating and $76 Target Price," an over 55% upside from Friday's closing price of $48.82.
The research note goes on to identify four factors as the foundation for Credit Suisse's outperform bull call. These include the structure of the American sports betting business, in which features like limited licenses "should lead to higher than expected market share," and COVID-19's tendency to push revenue-hungry states to fast-track legalization of online sportsbook activity.
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The other factors the Zurich investment bank cites include "the evolution of in-game betting which benefits margins and volumes" and DraftKings' "unique customer acquisition strategy and marketing relationships."
Credit Suisse isn't the only analyst giving DraftKings a Monday morning boost. Brad Erickson, an analyst at Needham, also initiated coverage of the stock this morning, though his $70 price tag forecasts a more restrained 43% upside. According to reporting by Bloomberg and Investing Info Daily, Erickson describes DraftKings as ranking among the "leading beneficiaries as online sports betting and gambling take off in the U.S." He also says Needham is "encouraged on DKNG due to clear outperformance on the customer acquisition front."
Credit Suisse and Needham are outliers from the general analyst consensus about DraftKings. Many investors and analysts were relatively unimpressed overall by the sports betting company's third-quarter earnings preview, issued as part of its recent stock prospectus. According to the Olympia Report, DraftKings' consensus price target among 22 analysts is $51.81, approximately the same as its current trading price.
