Goldman Sachs Upgrades DraftKings, Raises Penn Target by Almost $40 a Share
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Goldman Sachs upgraded DraftKings to a buy with a $65 price target and reiterated Penn as a buy with a growing price target from $86 to $124 a share.
As of 12:30pm ET, DraftKings was up seven percent on the day to $54.90, while Penn was down 1.8 percent to $102.12.
The DraftKings upgrade was based on what the analysts said was a market leader position and “ability to participate in the economics of single operator states.” DraftKings, for example, runs sports betting in New Hampshire through its contract with the state lottery.
The Penn upgrade comes from its association with the Barstool brand. Because Barstool has a natural following, unlike any other brand on the market, the analysts said they are encouraged by the lower acquisition cost and “see potential for a deepening competitive moat from other market leaders.”
Both DraftKings and Penn, through Barstool, are in the driver’s seat to build scale while reducing acquisition costs.
The note also says that, given Barstool’s success with Penn, it expects to see sizeable acquisition partnership announcements with media brands that drive value in the future.
A Bank of America note, based on three days of incremental app downloads in the first three days of online betting in Michigan, put Barstool share (14 percent) only behind DraftKings (40 percent) and FanDuel (27 percent).