An analyst says sports betting company DraftKings Inc (NASDAQ:DKNG) could have a challenging second quarter report, but remains optimistic ahead of the 2024 NFL season.

The DraftKings Analyst: Bank of America analyst Shaun C. Kelley reiterated a Buy rating on DraftKings and lowered the price target from $54 to $50.

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The Analyst Takeaways: Near-term pressure and a potential second-quarter earnings miss could prove difficult for DraftKings, Kelley said.

The analyst lowers Q2 EBITDA estimates to $130 million, compared to guidance of $150 million from the company.

"We think a 2Q miss is expected by investors, and think focus will be on the 2024 guide and outlook for customer acquisition," Kelley said.

DraftKings reports second quarter financial results after market close on Aug. 1.

The analyst said key questions ahead of the earnings report include customer acquisition, gross margins in the sports betting sector and any changes to forward EBITDA guidance.

Another key concern ahead of the earnings report is DraftKings' competitor FanDuel, which is a unit of Flutter Entertainment (NYSE:FLUT). The report shows a Q2 online sports betting market share of 33% for DraftKings versus FanDuel's 45%. In the first quarter, DraftKings trailed FanDuel 36% to 44%.

Conservative guidance of 30% EBITDA flow-through is cited as a reason the analyst is cautious on DraftKings going forward. However, the analyst believes DraftKings can have higher flow-through than its competitors.

Kelley believes FanDuel could have improved in the second quarter with strength tied to NBA betting. For DraftKings, its strong presence in the NFL betting segment could help power the second half of the fiscal year.

"We think DKNG is still well-positioned to execute during 2H and NFL season where it tends to excel, and see both easier hold comps ahead and strong handle share growth in Q2 as positive signs."

DKNG Price Action: DraftKings shares were down 0.24% to $36.84 on Monday, versus a 52-week trading range of $25.41 to $49.57. DraftKings shares are up 19.3% over the last year.

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