DraftKings stock gains after record revenue and increased 2023 guidance

DraftKings Inc. cleared $800 million in revenue in the fourth quarter, a new record just one quarter after topping $500 million for the first time, as the online-gambling company’s move into new states continues to boost sales.

reported a fourth-quarter loss of $242.7 million, or 53 cents a share, improving from a loss of 80 cents a share a year ago. Revenue jumped to $855.1 million from $473 million in the holiday quarter of 2021, and easily surpassing analysts’ expectations.

Analysts on average expected a loss of 62 cents a share on sales of $801 million, according to FactSet. DraftKings shares gained about 5% in after-hours trading immediately following the release of the results, after closing with a 0.2% increase at $17.81.

DraftKings’ stock has been on a tear this year, rising nearly 56% in 2023, on hopes that new states legalizing sports gambling will expand the company’s customer base — DraftKings launched in Maryland and Kansas during the fourth quarter, and debuted in Ohio on Jan. 1. Additionally, analysts believe the company will be able to pull back on advertising in states where it is already established, which will cut its costs.

“We like the setup into ’23 on product improvements generating higher yields and a clear state launch road map providing opportunity to exhibit advertising leverage in vintage states (forecasting same-state incremental margins improving ~55%),” Oppenheimer analysts wrote this week, while maintaining an outperform rating and $23 price target.

While the fourth quarter has traditionally been the largest for DraftKings thanks to the NFL playoffs, hopes are high for the first quarter, thanks to the Super Bowl, NCAA football championships and March Madness. Executives suggested optimism as well in Thursday’s report, slightly increasing their annual revenue guidance for 2023 to $2.85 billion to $3.05 billion from a previous forecast that called for $2.8 billion to $3 billion. A change in the company’s guidance for adjusted Ebitda was larger, with executives now calling for an adjusted-Ebitda loss of $350 million to $450 million, after previously stating a loss of $475 million to $575 million.

“Moving into 2023, we will continue to drive revenue growth and focus on expense management to accelerate our adjusted Ebitda growth,” Chief Executive Jason Robins said in a statement. “We have already taken several actions that resulted in an increase to our revenue guidance and significant improvement in our adjusted Ebitda guidance.”

During the past 12 months, DraftKings shares have declined 22.6%, as the S&P 500 index
has dropped 7.3%.

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