Citing “myriad issues” impacting Wall Street estimates, Jefferies Equity Research analyst David Katz took what he said was an unusual step. He issued a second intra-quarter update on his revenue projections for DraftKings.

Katz wrote, “We believe that EBITDA remains set up to double for 2024 to 2025 and continue outsized growth ongoing. … Thus, DKNG remains a top pick.”

That said, he modeled “a substantial impact” on cash flow from Illinois’s substantial increase on taxes on sports betting providers. Those levies took effect July 1. Katz predicted modest revenue declines over the next five quarters, as well as $100 million in cash-flow impact over the next 18 months. “Although we have not forecasted 2026 onward, history suggests that these trends should continue and as revenue growth moderated, the cost impact should be approximately fully mitigated.”

DraftKings’s purchase of Jackpocket closed in the second quarter of this year. Katz anticipated that its contribution would be reflected in forthcoming revenue and cash-flow estimates.

“Our impression is that there should be some revenue growth through 2025 and modest impact on 2Q24 onward at the EBITDA level,” Katz wrote. He predicted cash flow impact of $10.2 million for all of 2024 and a contribution of $12.4 million the following year.

The analyst also revised his estimates to include DraftKings stock repurchases by management, made out of free cash flow. He foresaw them accelerating from $155 million this year to $306 million in 2025.

“Although [management] has not indicated this will be the case, we believe that highlighting the dramatic acceleration in cash generation, with EBITDA doubling.” Katz predicted that buying back the stock would be a productive way of offsetting share-based compensation and executive stock sales.

Katz revised his cash-flow estimate for the second quarter to $122.3 million, up $300,000. His revenue projection went from almost $1.2 billion to nearly $1.3 billion.

For the 2024 fiscal year, Katz modeled $449 million in cash flow (down from $493 million) and revenue of $5.1 billion, up from $4.9 billion.

The Jefferies analyst stood firm on his price target and rating. He continued a Buy rating with a $54 per share price goal.

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