Front Office Sports recently reported that DraftKings has overtaken FanDuel for the highest market share of online gambling in the U.S.
But a new contender is emerging. On November 14, ESPN Bets, a partnership between the sports channel and Penn Entertainment, will debut. During Friday’s earnings call, DraftKings Founder and CEO Jason Robins was asked if he was concerned about the new competitor.
“We always expect competitors to come and try to give our customers an experience and we have to just give them a better experience,” Robins said. “Certainly, people will go take promos, but in the end, we believe that most customers will gravitate to the best product, the best experience. So we’re going to stay disciplined and it’ll probably play out in a very similar fashion to other times.”
DraftKings Friday reported revenue of $790 million for the third quarter of 2023, an increase of $288 million and a 57% year-over-year jump.
The company also announced it averaged 2.3 million unique customers in the third quarter, a year-over-year increase of 40%. The average revenue per unique player also rose in the third quarter to $114, a 14% increase from the same time period in 2022.
Robins noted that DraftKings’s customers have been “sticky” through multiple waves of competition. He expects the company’s market share to continue to grow, even as more competition arrives.
“Flat share would be a disappointment,” Robins said. “We’ve been gaining share. I expect our team to be dissatisfied if we don’t continue to gain share. That doesn’t mean that we’re necessarily going to guide to that; obviously, as I noted, we’re not. It’s just a matter of how we forecast and the guidance methodology that we choose that you end up with the sort of flattish-share implicit assumption in there.”
Robins agreed with an analyst who stated that DraftKings’s growth has been explosive over the last two years. But while projections indicated the percentage of growth will decrease, that doesn’t mean revenue will do the same.
“As the base gets bigger, that percentage growth will be harder to keep in the 50- to 60-plus (percent) range,” Robins said, noting that addition of new states legalizing sports betting could change projections. “I think next year there will be very healthy growth across all of our state cohorts. It’s just that … adding nearly a billion dollars in revenue doesn’t give the same percentage increase as it did in the past.”
Analysts were bullish on the third-quarter report.
“The quarter continues to raise the horizon level for the Street and the upside potential in the shares,” wrote Jefferies equity analyst David Katz in a statement. “We believe the quarterly upside and above-Street guidance support our thesis in digital that leading operators, notably DraftKings, are pivoting from investment spending to profits through product advancement. In short, we believe this transition has considerable room to evolve. Thus, we expect a positive reaction in the shares.”
J. P. Morgan analyst Joseph Greff wrote that the company’s 2023 third quarter “meaningfully exceeded our $708 million estimate and the Street’s $705 million, which had moved up in recent weeks (and this is despite a $40 million unfavorable sports outcome impact to the start of the football season in September), and was up an impressive 57% year over year. Moreover, its third EBITDA loss of $153 million (inclusive of a $30 million impact from unfavorable sports outcomes) was $46 million ahead of our $200 million estimate (consensus was $208 million).”
