DraftKings Posts Better-Than-Feared Quarterly Loss; Lifts Full-Year Revenue Outlook

The U.S.-focused gambling operator DraftKings reported better-than-feared loss and higher revenue in the first quarter and raised the 2021 revenue outlook but the strong results failed to lift stocks which have lost over 18% so far this month.

Boston-based sports betting platform said its revenue increased 253% to $312 million from $89 million seen during the same period a year ago. That was above Wall Street’s consensus estimates of $236.2 million. The company reported a loss per share of $0.36, better compared to analysts’ expectations for a loss of $0.42.

DraftKings raised their forecasts for its fiscal year 2021 revenue guidance to $1.05 billion to $1.15 billion, up from a range of $900 million to $1 billion, which equates to year-over-year growth of 63% to 79% and a 16% increase compared to the midpoint of our previous guidance.

The increase reflects solid performance in the first quarter of 2021, continued strong user activation due to the effectiveness of our marketing spend, well-executed launches of mobile sports betting and iGaming in Michigan and mobile sports betting in Virginia, and a modest contribution from our recently completed acquisitions, the company said in the statement.

At the time of writing, DraftKings shares traded about 5% lower at $46.06 on Monday.

Analyst Comments

“1Q revs and updated ’21 rev guidance meaningfully beat, showing how strong the US sports betting / iGaming mkt is and DKNG’s dominant position. However, DKNG suggested higher EBITDA losses and is issuing materially more stock comp than expected. Our price target drops $3 to $63, still attractive, Overweight,” noted Thomas Allen, equity analyst at Morgan Stanley.

DraftKings Stock Price Forecast

Twenty-three analysts who offered stock ratings for DraftKings in the last three months forecast the average price in 12 months of $70.86 with a high forecast of $105.00 and a low forecast of $50.00.

The average price target represents a 53.78% increase from the last price of $46.08. Of those 23 analysts, 17 rated “Buy”, six rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $63 with a high of $182 under a bull scenario and $11 under the worst-case scenario. The firm gave an “Overweight” rating on the gambling operator’s stock.

Several other analysts have also updated their stock outlook. Craig-Hallum slashed the target price to $60 from $70. Needham lowered the stock price forecast to $73 from $81. Benchmark trimmed the price objective to $64. JP Morgan cut the target price to $54 from $58. Truist Securities slashed the target price to $54 from $65.

“The continued progression of beat and raise quarters, coupled with strategic substantiveness should draw a positive reaction in the shares and supports our bullish stance on the name. The degree of stock reaction should also lie in commentary from Mgt regarding more recent complex state legalizations and the roll-out of its tech platform through the remainder for the year. Execution and estimate progression are central to our call, rather than valuation,” noted David Katz, equity analyst at Jefferies.

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