JPMorgan downgrades DraftKings, says other sports betting stocks look more attractive

It’s time for investors to ditch shares of DraftKings , according to JPMorgan. Analyst Joseph Greff downgraded shares of the gaming stock to underweight from neutral, saying in a note to clients that the company’s peers offer a clearer path to online-sports-betting (OSM) profitability. “For DKNG, we see a longer runway and more risk to achieving OSB profitability than peers; with the stock’s bounce since earnings, we see 20% downside to our unchanged year-end 2023 price target,” he wrote. Shares shed nearly 5% before the bell on the downgrade. Greff highlighted the company’s worse-than-anticipated EBITDA guidance among the reasons for the downgrade. For 2023, DraftKings guided for an EBITDA loss of $475 million to $575 million even with the launch of its product in Maryland, Ohio and Massachusetts, which is above the bank’s estimate of a $350 million loss. DraftKings’ stock has come under pressure this year, falling nearly 45% since the start of 2022 and 58.6% from its 52-week highs. The bank’s $12 price target implies a near 21% downside for the stock from Friday’s close. JPMorgan also downgraded shares of Penn Entertainment to neutral from overweight. The stock fell 2.3% in the premarket. Penn shares “are within reach of our price target and we see it as possessing less upside than either Las Vegas Strip-centric and LV Locals centric stocks; so we see it as a relative underperformer. In other words, our downgrade of PENN is a valuation call,” JPMorgan said. — CNBC’s Michael Bloom contributed reporting