DraftKings Stock Surges After Strong Q1 Results

DraftKings stock surged on Friday as the market responded positively to the company's strong first-quarter results. However, analysts have differing opinions on the road to profitability.

On Thursday, DraftKings (ticker: DKNG) reported first-quarter revenue of $769.65 million, surpassing analysts' expectations of $704.3 million. This figure also represented a significant increase from the $417.21 million recorded in the same period last year, according to FactSet.

The sports betting company also posted an adjusted loss of 51 cents per share for the quarter, surpassing analysts' forecasted loss of 70 cents per share. This was a marked improvement from the 74-cent per share loss reported in the same quarter last year.

Following these results, DraftKings stock experienced a 15% surge, reaching $24.54 during Friday afternoon trading.

Bernie McTernan, an analyst at Needham, expressed optimism about the company's performance in his recent report. He stated that the data points from the latest quarter are "continuing to provide encouraging signs for the future profitability of the enterprise."

McTernan also highlighted the favorable legislative environment, which he believes supports greater market access and benefits both consumers and states. With a Buy rating and a price target of $28 on shares, McTernan remains optimistic about DraftKings' prospects.

DraftKings Optimistic about Sports Betting Legalization Trends

DraftKings, a leading sports betting company, remains optimistic about the increasing trend of sports betting legalization across different states. In a recent letter to shareholders, the company stated that despite not all states allowing sports betting, the overall trajectory of legalization appears positive. They anticipate the ability to generate positive Adjusted EBITDA for the entire year of 2024 should new states continue to launch sports betting in the coming years.

With a current presence in 21 states, the company has already established itself in the mobile sports betting market.

Boosting their fiscal year 2023 outlook, DraftKings now expects full-year revenue to range between $3.135 billion and $3.235 billion. This revision reflects improved customer retention and engagement, among other positive factors.

In addition to revenue projections, the company has also adjusted its adjusted EBITDA forecast for fiscal year 2023. The previous loss range of $350 million to $450 million has been revised to a narrower loss range of $290 million to $340 million.

Stifel analyst Jeffrey Stantial commented on the guidance, stating that it is conservatively estimated but positions DraftKings for a consistent beat-and-raise performance.

Profitability Still a Few Quarters Away

According to Stantial, the company's profitability is likely to remain elusive for several quarters. This prediction is based on the risks associated with market share constricting as the company reevaluates its customer acquisition spending strategy. Additionally, competition from industry giants such as Fanatics and Bet 365, who are making their mark in the United States, poses a challenge to the company's growth prospects.

Despite these concerns, Stantial has maintained his Hold rating and set a target price of $23.