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JPM downgrades DraftKings citing ‘risk to profitability’

Yahoo Finance Live assesses J.P. Morgan's stock downgrade to DraftKings shares.

Video Transcript

JOSH SCHAFER: Well, my play today is DraftKings-- shares down about 5% today on a downgrade from JP Morgan analyst Joe Greff.

And he's highlighting that DraftKings recently issued 2023 guidance of a $470 million to $570 million EBITDA loss in 2023. That came in worse than expected than what JPMorgan had. They had that number about $100 million lower, guys. You add in that the stock is up 20% since earnings, big drop on the day of earnings, then up 20% since, and Greff is pretty much saying, the stock is just valued too high right now. They have a $12 price target. He's not really sure why these shares have gone back up.

And then, Dave, the other thing to watch here, too, is always talking about profitability with DraftKings.

DAVID BRIGGS: Yeah.

JOSH SCHAFER: Right?

DAVID BRIGGS: That's it, yeah.

JOSH SCHAFER: And Caesars posted digital profitability in October, they said. You have MGM projecting profitability sometime next year, FanDuel projecting full year profitability next year, and DraftKings saying they're going to lose somewhere in the neighborhood of $500 million.

So if you're going to own one of those stocks, he's pretty much arguing DraftKings just isn't the one to own--

DAVID BRIGGS: That's not the one.

JOSH SCHAFER: --next year, over the next 12 months. Seems like probably a fair take there.

DAVID BRIGGS: It does. BetMGM, MGM was down today about 2.5%, Caesars was down about 2.5%. It'll be interesting, Fanatics is getting in this game, a company valued at $27 billion, private company getting in this game early next year. Will that further impact DraftKings upside? And they didn't get California. That was another big miss.

Josh Schafer, thanks for playing today.