DraftKings Inc. The stock price target was dropped on the benchmark on Thursday, with analyst Mike Hickey saying he “rationalized” his valuation of the company, given the recent broad market trend in higher growth and gaming stocks.
Hickey confirmed its buy rating on the digital sports entertainment and gaming company’s stock DKNG,
Since it went public last year, but has lowered its price target from $70 to $50. The new target is about 59 per cent above current levels.
“We suspect that markets are effectively the Omicron coronavirus variant and the potential impact on the economy and sport, an inflationary impact on economic growth and consumer discretionary spending, and a recent hawkish pivot from the Federal Reserve that includes an accelerated outlook on interest. There is effectively a pricing concern. Rate hikes, which could have an exaggerated effect on high-multiple growth companies,” Hickey wrote in a research note to clients.
The stock was up as much as 4.2% in intraday trading before gaining 0.5% in afternoon trade.
DraftKings stock closed down 34.1% over the past month at its lowest price since July 2020 on Wednesday, and has lost nearly half its value since closing at a five-month high of $63.67 on September 9. In comparison, the Russell 2000 RUT,
In the past one month, the index of small-cap stocks has fallen 7.4% while the S&P 500 index SPX,
Has slipped 1.7%.
The stock was helped by sales after the company reported on November 5 lower-than-expected third-quarter losses and revenue that was lower than forecast.
The stock was still up 79% since April 23, 2020, when DraftKings’ merger with a Special Purpose Acquisition Company (SPAC) effectively closed to take DraftKings public.
read moreHere are 5 things to know: After DraftKings went public and attained a market cap of $6 billion.
Benchmark’s Hickey said that while he remained “cautious” of the potential impact from the Omicron variant, he was reminded of the early COVID impact last year, which provided “a meaningful increase” in user engagement, opening up new betting opportunities. Gave momentum and helped drive positive regulator momentum. Towards the legalization of sports betting.
The stock is down 32.6% this year after gaining 335.1% in 2021, while the S&P 500 is down 21.2% this year after gaining 16.3% last year.