DraftKings stock is sinking after earnings.
Courtesy of DraftKings
DraftKings stock has tumbled 14% Friday despite the sports-betting company beating earnings estimates in the fourth quarter.
The company raised its revenue guidance for 2022 but its adjusted Ebitda guidance came in worse than expected, signaling more losses ahead.
The sports betting company reported an adjusted loss of 35 cents a share on revenue of $473 million in the fourth quarter, beating estimates on both fronts.
Analysts surveyed by FactSet expected DraftKings (ticker: DKNG) to report a loss of 81 cents a share on revenue of $446 million. A year earlier, DraftKings posted a loss of 68 cents a share on revenue of $322 million.
DraftKings raised its 2022 revenue guidance to a range of $1.85 billion to $2 billion from a previous forecast of $1.7 billion to $1.9 billion but introduced guidance for adjusted Ebitda to be negative $825 million to $925 million in 2022.
That’s well below analyst estimates for a $699 million loss.
While revenue for the quarter rose 47%, cost of revenue rose 59% to $253 million and sales and marketing expenses climbed 45% to $278 million, reflecting the company’s expansion into new states.
Investors, who have been patiently awaiting direction on DraftKings’ path to profitability, did, however, get some answers. The company said it expects to generate positive contribution profit—which it arrives at by subtracting the cost of sales and advertising costs from revenue—for the fiscal year 2022 across all the states it currently operates in.
The gambling giant said assuming it had not launched in any new states after Dec. 31, it would have expected positive adjusted Ebitda in the fourth quarter of 2022. The company launched mobile sports betting in New York and Louisiana last month.
Instead, it expects to reach positive adjusted Ebitda in the fourth quarter of 2023, based on the number of states it operates in and if state legalization trends remain consistent with previous years.
Benchmark analyst Mike Hickey described it as “encouraging guidance toward future profitability,” in a note early Friday. Hickey, who has a Buy rating on the stock and a price target of $50 noted that the company’s adjusted Ebitda view “disappointed” the consensus view.
DraftKings is the No. 2 operator in the U.S. online sports gambling behind FanDuel, which is controlled by European gambling giant Flutter Entertainment (PDYPY).
DraftKings stock has fallen 19.7% year-to-date, while the S&P 500 has dropped 8.1% over the same period.
The gambling giant’s stock has fallen more than 60% since Labor Day as investors have weighed up increasingly intense competition in the sports betting sector and the company’s heavy losses.
Write to Callum Keown at [email protected]
