Online gambling app DraftKings (DKNG) reported a smaller-than-expected loss and booming revenue growth early Friday after the year's biggest events in sports betting. But DraftKings stock reversed lower.
Estimates: Per-share losses are expected to widen to 51 cents from 18 cents a year ago, while revenue surges 151% to $222.6 million.
Results: DraftKings lost 36 cents a share as revenue skyrocketed 252% to $312 million. Monthly unique paying customers jumped 114% to 1.5 million. Average revenue per user climbed 48% to $61.
Outlook: The online sports betting specialist raised its full-year revenue target to $1.05 billion-$1.15 billion, up from a prior view of $900 million-$1 billion and above consensus estimates for $999.7 million.
The report comes after the Super Bowl in February, when 50 million more people in 2021 than in 2020 were able to bet as more states legalize sports gambling, according to PlayUSA.com, which estimated 80% 0f the $500 million in wagers were online.
The following month came the March Madness NCAA men's basketball tournament. PlayUSA Network said the 16-day tournament's handle came in at about $1.6 billion.
"Betting on the NCAA Tournament came in on the high end of our projections," said PlayUSA Network analyst Eric Ramsey. "Enthusiasm in new markets, particularly in Michigan, Tennessee and Virginia, but also in Colorado and Indiana, really helped make March Madness a massive success. It also helped that New Jersey and Nevada, the two largest markets in the U.S., met what were lofty expectations."
But customer acquisition costs are rising as the pool of potential gamblers continues to expand. In Q4, DraftKings invested $184 million on sales and marketing vs. $63 million a year earlier. In a call with investors, CFO Jason Park said the company expects to spend more on marketing in 2021 compared to 2020.
Shares gave up early gains to close down 6.7% at 48.42 on the stock market today. DraftKings stock is well below the 10-week line and is now below the 40-week line, according to MarketSmith chart analysis. There is currently no buy point for the stock, as it is not forming any bases, and the relative strength line is trending downward.
MGM Resorts (MGM), which operates online betting app BetMGM, rose 2.6% Friday. Penn National Gaming (PENN), which has a stake in the Barstool betting platform, climbed 3.2%, after selling off 8.2% Thursday on mixed earnings.
Caesars Entertainment (CZR) rallied 3.45% after jumping 7.8% Wednesday on mixed Q1 results and signs of strong Vegas demand.
Meanwhile, DraftKings stock is eyeing a boost from the New York market. Gov. Andrew Cuomo last month approved legislation to allow online sports betting in the state. The plan is to initially allow two platforms with the possibility of adding more later.
DraftKings stock got a boost March 30, when it announced it had bought sports betting video broadcast company Vegas Sports Information Network. Launched in 2017, VSiN is a multiplatform broadcast and content company delivering sports betting news, analysis and data. Terms of the deal were not disclosed.
The acquisition enables DraftKings, which is live in 14 states, to further build out its content capabilities and grow VSiN's ability to broaden its audience. In a note to clients after the purchase, Jefferies analyst David Katz said VSiN expands DKNG's customer acquisition cost efficiencies in the future.
Shares of DraftKings (NASDAQ:DKNG) are trading lower early Friday after the sportsbook operator delivered better-than-expected first quarter results while raising its 2021 revenue guidance.
The Boston-based company said it lost 36 cents a share on revenue of $312 million in the first three months of the year. Analysts expected a loss of 45 cents on sales of $237.02 million. Monthly unique players (MUPs) surged 114 percent, while spending per MUP was $61, a 48 percent year-over-year increase. Despite those impressive numbers, DraftKings is off 1.55 percent in early trading, extending a slide of 16.43 percent over the past month, one that’s taken the stock down 30 percent from its March highs.
That MUP spend beat the consensus estimate of $47 and DraftKings upped its 2021 revenue forecast to $1.05 billion to $1.15 billion from prior guidance of $900 million to $1 billion. Analysts are expecting $1.05 billion.
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,” said the company in a statement.
DraftKings adds the 2021 revenue outlook pertains to the states in which it’s currently operational, assumes no departures from those states, and that the domestic collegiate and professional sports calendars will not be dramatically altered.
Much of the near- to medium-term thesis for DraftKings stock revolves around the expansion of internet casinos and online sports betting, meaning the shares are sensitive to political headwinds and tailwinds.
DraftKings now offers online sports betting in a dozen states covering a quarter of the US population. That’s after rolling out mobile sports betting and iGaming in Michigan and mobile sports betting in Virginia in the January through March period. Its online casino platform is live in four states, representing 10 percent of the population.
Already this year, Arizona, New York, and Wyoming passed mobile sports wagering legislation.
“In 2021, 25 state legislatures have introduced legislation to legalize mobile sports betting, five state legislatures have introduced legislation to expand their existing sports wagering frameworks, and one state legislature has introduced legislation to legalize sports betting limited to retail locations,” according to the company. “In addition, four states have introduced iGaming legislation and three states have introduced online poker legislation.”
With iGaming and regulated sports betting being the shiny new objects in the gaming industry and the investment world, it’s not surprising that some novice investors may forget how DraftKings got its start.
That being daily fantasy sports (DFS). It’s been almost a decade since DraftKings became DFS pioneers — a status it leveraged into sports betting success — and that segment is still growing.
For example, the operator said entry fees for this year’s Super Bowl surged 66 percent, while active users for that event increased by 60 percent.