Morgan Stanley: DraftKings Emerges as a Top Pick Despite New Illinois Tax Legislation
Morgan Stanley has recently highlighted DraftKings as a leading choice in the North American gaming industry.
Impact of Illinois Tax Changes
Despite facing new tax legislation challenges in Illinois, the firm sees a strong future for the sports betting company.
Illinois has introduced a graduated tax rate on sports wagering, effective July 1, increasing the average rate to 36.5% for major operators such as DraftKings and FanDuel, up from 15%.
The tax hike poses a challenge, yet DraftKings has shown resilience by maintaining its financial guidance for 2024.
Strategic Insights and Financial Forecasts
Analyst Stephen Grambling and his team at Morgan Stanley point to strong market growth and a balanced promotional environment as key drivers for DraftKings.
The firm also notes that the lack of similar tax increases in other states, like New Jersey, could positively impact the company’s stock.
Morgan Stanley has revised its financial estimates to align with recent market trends and DraftKings’ acquisition of Jackpocket.
The new projections estimate DraftKings’ adjusted EBITDA at $570 million for 2024, $1.311 billion for 2025, and $2.108 billion for 2026.
The firm has set a 12-month price target of $51 for DraftKings, using a mix of enterprise value and discounted cash flow models.
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