One Wall Street analyst thinks DraftKings stock will hit $50. Is it a purchase?

Actions of DraftKings (DKNG -3.84%) hit a 52-week high of $49.57 earlier this year amid strong growth in the online sports betting market. Recent concerns about regulatory headwinds have taken shares off their highs, but Macquarie analyst Chad Beynon has an outperform (buy) rating on the stock with a $50 price target. Is the stock a buy now?

Why Buy DraftKings Stock?

Illinois is the latest state to move to a higher tax rate for sports betting companies, creating uncertainty about DraftKings’ ability to meet its profit goal next year.

DraftKings has no problem growing revenue, which rose 26% from last year, but Wall Street analysts expect the company to report an adjusted loss of $0.28 per share in 2024. While a loss , this is a significant improvement over the past loss of $1.73. year.

DraftKings is working to grow adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to between $900 million and $1 billion by 2025. Even with states moving to raise taxes on sports betting , management believes it will achieve this target. To offset the higher tax rates, it plans to introduce an additional gambling tax for customers in four states in 2025.

Importantly, the momentum in customer growth reflects a strong brand and market presence that may offset short-term headwinds. Management anticipates a strong second half of the year after reporting an 80% year-over-year increase in new iGaming and sports betting customers last quarter. The online sports betting market is expected to be worth $24 billion by 2029, according to Statista, but recent momentum suggests the market could be bigger than previous estimates.

For these reasons, the stock remains a compelling investment opportunity. Another strong earnings report after the upcoming NFL season could be all it takes to send the stock back to its highs.