DraftKings’ Strong Quarter Could Win Over Investors Worried About Sports Gambling

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Updated Aug. 6, 2021 9:34 americium ET / Original Aug. 6, 2021 9:33 americium ET

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The DraftKings Sportsbook astatine the Brook casino successful Seabrook, N.H.

Scott Eisen/Getty Images for DraftKings

DraftKings ’ better-than-expected earnings report for the 2nd 4th could assistance the institution commencement to triumph implicit investors who person been disquieted astir the eventual profitability of the online sports gambling business.

 The manufacture person operated successful the reddish successful the period, but its gross bushed expectations. And DraftKings’ losses based connected nett income and net earlier interest, taxes, depreciation, and amortization (Ebitda) were amended than expected. DraftKings lifted its full-year gross guidance to a scope of $1.210 cardinal to $1.290 cardinal from $1.050 cardinal to $1.150 billion.

 In premarket trading, DraftKings shares (ticker: DKNG) were up $3.77, oregon 7.4%, to $54.28. The banal remains mode beneath its March precocious of $74.

DraftKings’ second-quarter gross of $298 million, up astir 300% year-over-year, topped the statement estimation of $247 cardinal and the Ebitda nonaccomplishment was $95 cardinal successful the period, against a statement of $115 million. The adjusted nett nonaccomplishment was 26 cents a stock against estimates of 53 cents of reddish ink.

The institution is present unrecorded with online sports gambling operations successful 12 states with 25% of the U.S. population. It had 1.1 cardinal mean monthly unsocial users successful the 4th and generated an mean of $80 successful gross per idiosyncratic successful the period.

“We spot this arsenic a tiny motion that the tide whitethorn crook from the existent statement presumption that the manufacture is excessively competitory and the concern volition ne'er beryllium profitable,” wrote Thomas Allen, a Morgan Stanley analyst, successful a lawsuit note. He has an Overweight standing and a $60 terms target.

 DraftKings and FanDuel, which successful controlled by Flutter Entertainment (PDYPY), are the leaders successful the U.S. sports gambling manufacture but it remains precise competitory with Penn National Gaming (PENN), Caesars Entertainment (CZR), and MGM Resorts International (MGM) besides progressive successful the business.

 The bull lawsuit has been that the manufacture volition crook profitable successful a fewer years arsenic much states legalize online sports gambling and dense selling spending abates. But investors successful caller months person been acrophobic that profitability whitethorn beryllium elusive due to the fact that of competitory pressures and perchance precocious authorities taxes successful caller jurisdictions.

 “The bushed and rise continues with a astonishment of nonaccomplishment narrowing during the quarter, which should thrust a affirmative absorption successful the shares,” wrote Jefferies expert David Katz successful a lawsuit note. “The 4th continues to show amended than expected execution and broadening areas of maturation for the future. Katz has a Buy standing and $75 terms people connected the stock.

Write to Andrew Bary astatine andrew.bary@barrons.com 

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