DraftKings' fourth-quarter results could be hurt by severe weather in November
Benchmark analyst Mike Hickey said strong performance from U.S. sports betting in November could weigh on DraftKings (NASDAQ: DKNG ) fourth-quarter results.
A favorable outcome for bettors in the 11th month of the year could reduce DraftKings holding percentage by 150 basis points (1.5%), Hickey wrote in a note to clients today. If true, the lower stake could reduce the operator's fourth-quarter revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by $50 million and $35 million, respectively.
The analyst expects an EBITDA loss of $105 million and revenue of $3.695 billion in 2023, based on forecasts DraftKings issued last November. While December data isn't fully available yet, Hickey added that DraftKings' holdings will likely normalize in the 9% range in the final month of 2023, suggesting November may be an anomaly.
He rates the sports betting company's stock a "buy" with a $41 price target, which implies about 24% upside potential from today's closing price.
DraftKings’ 2024 outlook remains strong
The gaming company is expected to report October-December results on February 15 after the U.S. stock market closes. It has a knack for boosting sales and profit forecasts when it releases quarterly results -- something analysts and investors will likely be watching next month.
Boston-based DraftKings forecasts 2024 EBITDA of $350 million to $450 million and revenue of $4.5 billion to $4.8 billion. That means the gaming company could be profitable on an EBITDA basis for most, if not all, of 2024 while easily breaking revenue records.
By 2025, the online sports betting operator expects revenue of around $5 billion and adjusted EBITDA of $900 million, with those figures rising to $6.2 billion and $1.4 billion, respectively, and $1 billion the following year Dollar. By 2028, the operator expects revenue of $7.1 billion and EBITDA of $2.1 billion.
It may be a bit of a burden for DraftKings to meet expectations for its raised guidance, as after more than tripling last year, the stock has fallen 7.50% this week as investors take profits from its previously soaring share price.
Competitive Reviews Can Be Crucial
With November retention now a thing of the past, one of the other themes analysts and investors are likely to focus on when it comes to DraftKings is the operator's ability to retain and grow market share amid a slew of new competition in the sports betting space. Ability.
Data shows ESPN Bet and Fanatics are off to a strong start in states that offer online sports betting. But the numbers also confirm that established companies like DraftKings and FanDuel haven't yet felt much pressure from newer competitors.
That sentiment was echoed by DraftKings, which said it welcomes new competitors and sees them as a sign of a growing, maturing industry.
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Source: www.casino.org
