UPDATE: Management Compensation Takes $5 Out of DraftKings Inc. (DKNG), PT Lowered to $58 at Morgan Stanley

Morgan Stanley analyst Thomas Allen lowered the price target on DraftKings Inc. (NASDAQ: DKNG) to $58.00 (from $63.00) after performing a deep dive into the level of stock-based compensation, lower-than-expected cash, and higher share count. Looking into the financials, shares outstanding have grown from ~350m to ~430m, with only 37m of primary issuance. Additionally, the company recorded $483m of stock-based comp over the past year, with $1.1B in stock-based comp expected to expense over the next 2.1 years.

The analyst reiterated an Overweight rating, stating "When we initiated on DKNG in April 2020, we assumed a long-term share count of 350m diluted shares, based on company disclosures. Prior to this analysis, we had forecast 447m shares in 2025 (28% higher). We now model a 465m 2025 share count, adding in another (net settled) vested LTIP program and higher ongoing equity comp." "Our DKNG price target falls to $58 from $63, based on an unchanged 25x 2025e EBITDA, but reflecting 4% more shares and less cash."

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