Needham Explains How the DraftKings Inc. (DKNG) Network Effect Will Drive Growth and Profitability, PT Lowered to $73
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Needham & Company analyst Bernie McTernan lowered the price target on DraftKings Inc. (NASDAQ: DKNG) to $73.00 (from $81.00) noting that recent trends in estimate revisions continue with revenue going higher but adj. EBITDA losses widening. That said, if the
The analyst stated a Buy rating stating "DKNG’s scale currently helps them enhance and inform customer LTV through the use of AI which then creates thresholds for appropriate CAC levels. Meaning DKNG uses their scale to help make a customer relationship more profitable. We believe DKNG’s integration of social could further leverage its scale, potentially creating a sought-after network effect where bettors can engage with their friends and others on the platform and easily make similar bets. PENN is currently benefiting from a content-driven strategy with 54% of bets during the first 30 days in IL on Barstool exclusives an example of this. DKNG will be following a similar playbook but with user generated content. We think this is a smart avenue for the company to pursue and continue to innovate around, even if the 1.0 version is not the silver bullet for solving the network effect conundrum, as it has the potentially significant implications for subscriber growth and margins."
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