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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.
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DraftKings Earnings Report
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.
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DraftKings Stock
Shares gave up early gains to drop 5% to 49.24 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 2.9% Friday. Penn National Gaming (PENN), which has a stake in the Barstool betting platform, climbed 2.5%, after selling off 8.2% Thursday on mixed earnings.
Caesars Entertainment (CZR) rallied 3% 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.
DraftKings has existing broadcasting partnerships with Disney‘s (DIS) ESPN and Dish Network (DISH). It is also an official partner to the NBA, MLB, NFL, NASCAR, UFC and PGA Tour.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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