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DraftKings (DKNG)
NASDAQ:DKNG
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DraftKings
(NASDAQ:DKNG)61Neutral
Positive Factors
Product Initiatives
DKNG believes new product initiatives to drive live betting and iGaming growth will be additive to the run-rate and potentially prove guidance conservative.
Revenue and EBITDA Targets
DraftKings remains confident in its upgraded revenue targets for 2025 and delivering on $900-$1,000mn in EBITDA, noting hold and handle are running above assumptions.
Negative Factors
Taxation
The Administration is proposing an increase in the internet gaming and online sports wagering tax rates from 15 percent and 13 percent, respectively, to 25 percent.
DraftKings (DKNG) vs. S&P 500 (SPY)
Market Cap
$35.41B
Dividend YieldN/A
Average Volume (3M)11.82M
Price to Earnings (P/E)―
Beta (1Y)2.24
Revenue Growth30.07%
EPS Growth39.93%
CountryUS
Employees5,100
SectorConsumer Cyclical
Sector Strength53
IndustryHotels, Lodging & Leisure
Share Statistics
EPS (TTM)-1.05
Shares Outstanding489,956,200
10 Day Avg. Volume12,841,103
30 Day Avg. Volume11,822,435
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)4.12
Price to Cash Flow (P/CF)15.10
P/FCF Ratio16.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$58.18Price Target Upside47.63% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering29
DraftKings Business Overview & Revenue Model
Company DescriptionDraftKings Inc. is a digital sports entertainment and gaming company that operates in the online sports betting, iGaming, and daily fantasy sports sectors. Founded in 2012 and headquartered in Boston, Massachusetts, DraftKings provides users with the opportunity to engage in fantasy sports contests and place bets on a wide range of sports events through its online platforms. The company is known for its innovative gaming experiences and strives to enhance fan engagement through its cutting-edge technology and comprehensive range of products.
How the Company Makes MoneyDraftKings generates revenue primarily through three main streams: daily fantasy sports (DFS), sportsbook, and iGaming. In daily fantasy sports, users pay entry fees to participate in contests, and DraftKings takes a percentage of these fees as its revenue. The sportsbook segment involves online and retail sports betting, where the company earns money through the 'vig' or 'juice,' which is a margin included in the odds that ensures profit regardless of the outcome of an event. iGaming includes online casino games, where DraftKings earns money from users wagering on games like slots and table games. Additionally, the company has strategic partnerships with major sports leagues, teams, and media companies, which help expand its market presence and attract more users to its platforms. These partnerships can also provide exclusive content and promotional opportunities that enhance user engagement and retention.
DraftKings Financial Statement Overview
Summary
DraftKings is demonstrating solid revenue growth and improving cash flow management, which are positive signs for its future financial health. However, the company continues to struggle with profitability and high leverage, posing risks to long-term financial stability. Continued focus on operational efficiency and cost management will be crucial to achieving sustainable profitability.Income Statement
DraftKings shows a strong revenue growth trajectory, with a Revenue Growth Rate of 30.1% from 2023 to 2024. However, profitability metrics like Gross Profit Margin (38.1%) and Net Profit Margin (-10.6%) indicate ongoing challenges in achieving profitability. The negative EBIT and EBITDA margins suggest the company is still facing operational losses, although there is a notable improvement in net income compared to prior years.65
Positive
Balance Sheet
The balance sheet reveals potential areas of concern with a high Debt-to-Equity Ratio of 1.32, indicating significant leverage. However, the company has a substantial equity base with an Equity Ratio of 23.6%, providing some stability. Return on Equity (ROE) remains negative at -50.2%, reflecting ongoing profitability challenges.55
Neutral
Cash Flow
There is a strong improvement in cash flow, with Free Cash Flow turning positive in 2024. The Free Cash Flow Growth Rate is significant, and the Operating Cash Flow to Net Income Ratio of 0.82 suggests improved cash generation relative to net income. This indicates better cash management despite previous years of negative free cash flow.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.77B | 3.67B | 2.24B | 1.30B | 614.53M | Gross Profit |
| 1.82B | 1.37B | 756.19M | 501.86M | 267.94M | EBIT |
| -609.00M | -789.23M | -1.51B | -1.56B | -843.26M | EBITDA |
| -311.76M | -586.65M | -1.27B | -1.40B | -729.44M | Net Income Common Stockholders |
| -507.29M | -802.14M | -1.38B | -1.53B | -843.70M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 788.29M | 1.27B | 1.31B | 2.15B | 1.82B | Total Assets |
| 4.28B | 3.94B | 4.04B | 4.07B | 3.44B | Total Debt |
| 1.34B | 1.35B | 1.32B | 1.32B | 81.61M | Net Debt |
| 546.79M | 75.58M | 15.52M | -834.28M | -1.74B | Total Liabilities |
| 3.27B | 3.10B | 2.72B | 2.39B | 742.54M | Stockholders Equity |
| 1.01B | 840.31M | 1.32B | 1.68B | 2.70B |
| Cash Flow | Free Cash Flow | |||
| 407.59M | -115.14M | -729.16M | -517.78M | -385.57M | Operating Cash Flow |
| 417.77M | -1.75M | -625.52M | -419.51M | -337.88M | Investing Cash Flow |
| -566.60M | -90.36M | -208.77M | -195.02M | -227.34M | Financing Cash Flow |
| -144.47M | -63.22M | -16.73M | 1.14B | 2.31B |
DraftKings Technical Analysis
Negative
39.41
Price Trends
41.76
Negative
40.95
Negative
39.02
Positive
Market Momentum
-0.51
Positive
40.00
Neutral
29.23
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DKNG, the sentiment is Negative. The current price of 39.41 is below the 20-day moving average (MA) of 44.69, below the 50-day MA of 41.76, and above the 200-day MA of 39.02, indicating a neutral trend. The MACD of -0.51 indicates Positive momentum. The RSI at 40.00 is Neutral, neither overbought nor oversold. The STOCH value of 29.23 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DKNG.
DraftKings Risk Analysis
DraftKings disclosed 10 risk factors in its most recent earnings report. DraftKings reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
DraftKings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
65 Neutral | $9.03B | 13.40 | 21.76% | ― | 6.66% | -24.59% | |
64 Neutral | $2.36B | 526.00 | 3.61% | ― | 33.70% | ― | |
61 Neutral | $35.41B | ― | -54.81% | ― | 30.07% | 39.93% | |
60 Neutral | $13.01B | 10.45 | 0.79% | 3.53% | 1.60% | -22.47% | |
49 Neutral | $6.44B | ― | -6.38% | ― | -2.45% | -135.17% | |
44 Neutral | $2.95B | ― | -10.27% | ― | 3.38% | 38.18% | |
41 Neutral | $80.66M | ― | 229.13% | ― | -1.20% | 92.72% |
* Consumer Cyclical Sector Average
Performance Comparison
DKNG
DraftKings
39.41
-2.21
-5.31%
MGM
MGM Resorts
32.03
-10.61
-24.88%
PENN
Penn National Gaming
18.28
-0.46
-2.45%
CZR
Caesars Entertainment
28.48
-14.15
-33.19%
GAN
GAN
1.78
0.33
22.76%
RSI
Rush Street Interactive
10.52
4.73
81.69%
DraftKings Earnings Call Summary
Earnings Call Date: Feb 13, 2025 | % Change Since: -15.16% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call presents a largely positive outlook for DraftKings, with strong revenue growth, customer acquisition, and successful events such as the Super Bowl contributing to a favorable performance. However, challenges such as the impact of higher taxes in Illinois and concerns about handle growth are notable. Despite these hurdles, the overall sentiment remains optimistic with planned investments in live betting and increased revenue guidance for 2025.Highlights
Revenue Growth and Financial Performance
DraftKings reported a 30% year-over-year revenue increase in 2024 to $4.8 billion and a significant improvement in adjusted EBITDA, which increased by $332 million year-over-year to $181 million. Free cash flow was positive for the first time in the company's history.
Customer Base Expansion
DraftKings acquired 3.5 million new customers at record low customer acquisition costs, increasing the total customer base by 42% year-over-year to 10.1 million.
Q4 2024 Performance
Fourth quarter 2024 revenue was $1.393 billion, representing a 13% year-over-year growth with $89 million in adjusted EBITDA. Strong customer acquisition and engagement metrics contributed to this performance.
Super Bowl Success
On Super Bowl Sunday, DraftKings Sportsbook app reached #1 in the sports category and #3 across all apps in the App Store. The company set a record for Sportsbook handle at $436 million, marking the highest Sportsbook gross gaming revenue day in company history.
2025 Revenue Guidance Increase
DraftKings raised its fiscal year 2025 revenue guidance to $6.3 billion to $6.6 billion, representing year-over-year growth of 32% to 38%, due to expected investments in live betting.
Lowlights
Impact of Illinois Tax Increase
The new higher Illinois tax rate was a headwind, affecting DraftKings' financial performance in the state, despite efforts to mitigate the impact through reduced promotional intensity and marketing.
Handle Growth Concerns
Industry-wide handle growth slowed in Q4 2024, with concerns around factors such as the NFL schedule and election distractions affecting betting volumes.
Promotional Intensity
Although promotional intensity declined for both sports and iGaming, it is not yet at the desired levels, particularly in iGaming where the decline was less pronounced due to a lack of new state legalizations.
Company Guidance
During DraftKings' Fourth Quarter 2024 earnings call, the company reported strong financial results and provided guidance for fiscal year 2025. In 2024, DraftKings achieved a 30% increase in revenue year-over-year, reaching $4.8 billion, and improved its adjusted EBITDA by $332 million to $181 million, with free cash flow turning positive for the first time. The customer base grew by 42% to 10.1 million. For 2025, the company raised its revenue guidance range to $6.3 billion to $6.6 billion, representing a 32% to 38% year-over-year growth, while reaffirming its adjusted EBITDA guidance of $900 million to $1 billion. DraftKings highlighted its focus on live betting and emerging verticals such as digital lottery courier, with plans to leverage recent acquisitions to enhance technology and product offerings. The company anticipates a structural Sportsbook hold percentage of approximately 11% in 2025, with an adjusted gross margin expected to be in the range of 46% to 47%. Additionally, DraftKings aims to optimize its capital structure and explore opportunities in the debt markets to maximize shareholder returns.DraftKings Corporate Events
Private Placements and FinancingBusiness Operations and Strategy
DraftKings Secures $600 Million Term Loan for Growth
Positive
Mar 4, 2025
On March 4, 2025, DraftKings Inc. announced the closing of a $600 million senior secured term loan B credit facility, increased from an initially planned $500 million due to strong demand. The loan, maturing in March 2032, will be used for general corporate purposes and reflects DraftKings’ strategic financial positioning and growth ambitions in the competitive sports betting and gaming industry.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.