DraftKings
stock surged Friday as markets digested its positive first-quarter results, but analysts are drawing different cards when it comes to the path to profitability.
On Thursday,
DraftKings
(ticker: DKNG) posted first-quarter revenue of $769.65 million, higher than analysts’ estimate of $704.3 million, and soaring past the $417.21 million recorded a year ago, according to FactSet.
The sports betting company also posted an adjusted loss of 51 cents a share for the quarter, narrower than the 70-cent loss analysts had forecast, and improving upon the 74-cent loss from the year-ago quarter.
DraftKings stock jumped 15% to $24.54 in afternoon trading Friday.
Needham analyst Bernie McTernan wrote in a Friday report the company’s recent quarterly performance is “continuing to provide encouraging data points for the future profitability of the enterprise.”
“We think the legislative environment is overall supportive of greater market access as it’s a win-win for consumers and states,” he added. The analyst has a Buy rating and $28 price target on shares.
Not all states allow sports betting, but “legalization trends continue to be positive,” the company said in a letter to shareholders, adding that “under any reasonable new state launch scenario in 2023 and 2024, we expect to be able to generate positive Adjusted EBITDA for full-year 2024.” According to the earnings release, the company is live with mobile sports betting in 21 states.
The company on Thursday boosted its outlook for fiscal year 2023. It now projects full-year revenue between $3.135 billion and $3.235 billion, from a prior range of $2.85 billion to $3.05 billion, citing “stronger customer retention and engagement,” among other positives.
It also revised its full-year forecast for adjusted Ebitda—earnings before interest, taxes, depreciation, and amortization—to a loss of $290 million to $340 million from a previous loss range of $350 million to $450 million.
In a Thursday report, Stifel analyst Jeffrey Stantial called the guidance arguably conservative, adding that it likely positions DraftKings for a steady beat-and-raise story.
“However, profitability likely remains several quarters away,” Stantial continued. He added that he sees risk of market share constricting as the company rationalizes customer acquisition spend and competitors—including Fanatics and Bet 365—establish roots in the United States. He maintained his Hold rating and $23 price target.
Write to Emily Dattilo at [email protected]
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