DraftKings reports earnings on Friday.
Courtesy of DraftKings
DraftKings stock has cooled down in recent months, but analysts are upbeat ahead of the company’s earnings report this week.
The online sports betting and casino games firm (ticker: DKNG) is set to report second-quarter results on Friday. Wall Street’s consensus estimates calls for a net loss of 53 cents a share and sales of $244.2 million for the period. That’s up from a net loss of 55 cents a share and sales of $75 million in the year-ago quarter.
While investors will be watching for DraftKings to top these figures, the company’s outlook ahead will likely matter more for the stock. Analysts forecast sales will drop to $227 million in the third quarter before rebounding to $379.3 million in a football-season-fueled fourth quarter.
Some analysts also have high expectations for the latest quarter’s results.
BofA Securities analyst Shaun Kelley expects DraftKings to once again beat expectations and raise its full-year outlook. Kelley wrote in a note last week that the total online sports betting market is growing faster than he expected, as states have been more productive with their legal rollouts.
“While a portion of this growth is likely coming from pull-forward and faster than expected adoption (helped by very aggressive marketing spending), we do expect continued growth off these higher base levels as customer familiarity, products and in-play betting adoption all remain in their infancy,” Kelley wrote.
The stock has shed about 35% from its intraday high of $74.38 on March 22. A broader rotation away from high-growth tech firms in the spring and a short seller report in June haven’t helped. Though Kelley has a Neutral rating, his $60 price objective implies 24% upside for the stock now. He assigns a multiple of 17 times 2022 estimates revenue, which he describes as a premium to some other ultrahigh growth consumer firms.
“We believe this premium is justified given the early stage enthusiasm for the vertical and the scarcity value associated with DKNG, given it is the only U.S. pure-play for sports betting of meaningful size,” he wrote.
Truist analyst Barry Jonas notes that shares of interactive-focused betting firms like DraftKings have been weaker amid a broader sentiment swing and macroeconomic concerns.
“Companies will likely center expectations on a football season-timed recovery (pickup in volumes, media attention and some new state activity), though we still wonder about increasing focus on topline market share and profitability driving performance,” he added.
Oppenheimer analyst Jed Kelly noted last week that wagering data released by states where sports betting is legal bodes well for DraftKings, and implies the firm could top sales estimates for the second quarter by 20% to 30%. Still, he expects a conservative outlook for the third quarter as the company compares results to last summer’s resumed playoff games for basketball and hockey.
Kelly expects higher marketing spending heading into the football season, especially with more states offering online sports betting this year, like Michigan and Virginia. He has an $80 price target and Outperform rating.
Write to Connor Smith at [email protected]
