DraftKings (DKNG) stock, which took a hit from its lower-than-expected third-quarter revenue and 2024 guidance cut, has started 2025 on a positive note. Shares of this digital sports entertainment and gaming company are up about 10.5%, outperforming the S&P 500 Index ($SPX).
As DraftKings stock is trending higher, at least one Wall Street analyst expects shares to reach $62, the Street-high price target. This represents 5% upside from its last closing price of $40 on Jan. 14. Let’s dive deeper into DKNG stock’s outlook for 2025.
DraftKings’ Core Business Remains Solid
Despite the downward revision to its 2024 guidance, DraftKings’ core business remains strong, driven by a solid retention rate, new customer acquisitions, and higher engagement. In the third quarter, DraftKings grew its Sportsbook and iGaming customer base while reducing customer acquisition costs (CAC), which positions the company for continued growth.
DraftKings’ management maintains an optimistic outlook for fiscal 2025, projecting revenue between $6.2 billion and $6.6 billion. This represents a year-over-year growth rate of 27% to 35%, based on the updated 2024 guidance. The company anticipates adjusted EBITDA to be between $900 million and $1 billion for the same period. These projections are supported by a combination of revenue growth, solid expense management, and improved gross margins.
DraftKings’ financials will likely benefit from healthy customer engagement levels and an efficient strategy for acquiring new customers. Additionally, the expansion of its Sportsbook product into new jurisdictions, coupled with a higher structural sportsbook hold percentage, will bolster its market presence.
Key Growth Drivers for DraftKings
DraftKings is well-positioned to deliver solid growth despite the heightened competition in the sports betting and iGaming sector. It is continuously enhancing its product offerings and focusing on driving user engagement on its platform. A key highlight is the company’s ongoing differentiation of its Sportsbook. It introduced features designed to deepen customer engagement and loyalty.
Among the latest additions are exclusive NBA markets crafted to reflect the excitement of key game storylines and an expanded Same Game Parlay offering, now available for over 50 new NBA markets. These enhancements, the sustained popularity of its mobile sportsbook app, and the top-rated DraftKings Casino and Golden Nugget apps, are strengthening its foothold in the industry.
DraftKings’ improvement in its Sportsbook’s structural hold is worth noting. The Sportsbook’s structural hold, which is the percentage of total bets retained as revenue after payouts, is trending higher. Year-over-year growth in this metric has been driven by a surge in customer interest in parlay bets, with NFL parlay wagers performing exceptionally well. The company anticipates a structural sportsbook hold percentage of 11% for fiscal year 2025 and expects the metric to improve further in 2026. This trend underscores the increasing profitability of its sports betting operations.
DraftKings is also optimizing its promotional strategies. By identifying and managing customers with lower lifetime values, the company has improved its approach to promotions in both the online Sportsbook and iGaming sectors. These refinements are contributing to better promotional reinvestment outcomes while supporting the company’s goal of balancing growth with profitability.
Recognizing the rising popularity of micro-betting and live betting, DraftKings has strategically invested in enhancing these features. Through a mix of internal innovation and targeted acquisitions, the company has positioned itself to capitalize on these emerging trends, offering a compelling product suite that appeals to the next generation of bettors.
Will DraftKings Stock Hit $62?
Wall Street analysts are bullish about DKNG’s prospects. Reflecting the company’s potential, they have collectively assigned DraftKings stock a “Strong Buy” consensus rating.
DraftKings’ market position, increasing customer base, and improved operational metrics signal that the company is well-prepared to thrive in the expanding online gaming and sports betting market. If it can sustain its current momentum, deliver on its revenue and profitability targets, and capitalize on new opportunities, hitting the $62 price target in 2025 may very well be achievable.
