DraftKings’ (DKNG) 1Q22 earnings are anticipated to take place in May, and ahead of the print, BTIG analyst Clark Lampen thinks some estimate revisions are in order.
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Based upon a parsing of quarter-to-date state GGR (gross gaming revenue) data and traffic activity, the analyst thinks the company is likely to “meet or exceed” the revenue guidance. As such, Lampen’s $415 million revenue estimate remains as is.
Substantial promo activity around the New York launch and in states like Pennsylvania bring the EBITDA forecast down a little. This now sits at the “low end of guide” (-$337 million compared to -$327 million previously).
The GNOG acquisition, which was slated to close in Q1, is now anticipated to be completed in May, and therefore, Lampen only expects it to be a contributing factor from 2H22 onwards. As such, the analyst now calls for 2022 revenue/EBITDA of $2.02 billion/($858 million), respectively, compared to $2.06 billion/($835 million) before.
Looking ahead to 2023, the positive noises made by operators concerning player adoption trends are indicative of new markets which are “launching with higher initial adoption rates and shorter paths to penetration parity vs. seasoned markets.” As such, the FY23 revenue estimate is bumped higher – from 2.776 billion up to 2.900 billion. Moreover, should states such as California, Georgia, and Massachusetts launch, Lampen still sees “room for upside.” However, the flip side to that is the S&M (sales and marketing) expenses will push EBITDA downwards. To this end, Lampen lowered 2023’s EBITDA forecast from ($344.72) million to ($477.79) million.
Based on an increasing number of states achieving the “2-3 year breakeven to profitable stage,” beyond 2023, Lampen still sees a “reasonable path to ’24+ profitability.”
“The bigger question we see at the moment is what sort of impact ’22 product investment will have on retention and competitive dynamics as we eventually move past the launch phase,” the analyst summed up.
Down to the nitty-gritty, what does this all mean for investors? Lampen sticks to a Neutral (i.e., Hold) rating, without suggesting a fixed price target. (To watch Lampen’s track record, click here)
On the other hand, the Street has an average target, and a decidedly bullish one at that; the figure clocks in at $32.18, making room for one-year gains of ~100%. The ratings paint a less conclusive picture; based on 10 Buys vs. 11 Holds, the stock claims a Moderate Buy consensus view. (See DraftKings stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
