Wall Street is still optimistic about shares of the online casino and sportsbook firm DraftKings (NASDAQ: DKNG), despite the company giving back some of its post-earnings gains on Friday.

Macquarie analyst Chad Beynon stated that DraftKings is the greatest option to participate in the North American online betting market in a letter to clients on Friday. He added that the company's second-quarter results only strengthened his belief.

"DKNG has a long structural hold runway which, combined with handle market share gains and best-in-class in-play offering, position DKNG for strong top- and bottom- line outperformance in the near future,” observes Beynon who rates the stock “outperform” with a $55 price target, up from $53.

With net income of $158 million and adjusted profits before interest, taxes, depreciation, and amortization (EBITDA) of $301 million—both quarterly records—Boston-based DraftKings reported sales of $1.51 billion in the June quarter, a 37% year-over-year increase. The stock is now on track for a little weekly decrease, but this could be due to profit-taking after a 22.26% increase over the previous ninety days.

DraftKings' Appealing Value Based on Certain Measures

Rarely has DraftKings been considered an inexpensive stock in its roughly five years as a publicly traded firm, at least not according to metrics like price-to-earnings.

This is understandable given that it is a growth stock, which frequently commands premium pricing. Interestingly, Beynon notes that DraftKings trades at significant discounts to certain S&P 500 companies based on enterprise value/earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow (FCF).

"Current 2025 guidance implies 24x EV/EBITDA and FCF of 3% (rising to FCF yields of 5%/7% in ’26E/27E, in our view). We note S&P 500 companies with a 2024-26E revenue CAGR of 15-20% trade at 31x 2025E EBITDA and 2.5% FCF yield,” adds the analyst.

Although DraftKings hasn't joined the S&P 500 yet, its $22.51 billion market capitalization and steadily rising profitability should put it in a position to do so in the medium run. Nevertheless, FanDuel parent company Flutter Entertainment (NYSE: FLUT) is the most sensible gaming stock to enter that index anytime soon.

The Story of DraftKings Is Rich in Catalysts

Despite DraftKings' strong 16.18% year-to-date gain, there is still room for growth. Instead, investors should take into account possible tailwinds. These include the operator's proven commitment to repurchasing its shares, the previously noted attractive valuation, and the impending start of football season.

Furthermore, the company's 2025 projection now takes into consideration recent tax increases in Illinois, Louisiana, and New Jersey, demonstrating that DraftKings' overall business is robust enough to withstand unfavorable state-level tax legislation. Beynon anticipates further expansion.

“DKNG is a leader in the fast-growing US Online Gaming industry,” concludes the Macquarie analyst. We believe the company, which has transitioned to profitability, is well-positioned for double-digit revenue growth.”