A bold-face-name (Cal Ripken) and a bold prediction (possibly $1 billion in 2021 revenue) infused DraftKings’ earnings report with extra electricity Friday.
One day after naming Ripken, the former Baltimore Orioles shortstop and third baseman famous for his record consecutive games streak and Hall of Fame status, became a board adviser, DraftKings posted earnings that missed Wall Street forecasts, but revenue steamed past them.
DraftKings shares surged on the news, climbing $3.72, or 6.43% on Friday to close at $61.53 on the Nasdaq.
“We come away encouraged by DraftKings strong execution and attribute the fourth quarter upside (relative to our estimate) to lower-than-anticipated promotion costs and daily fantasy sports, a product that is still growing and where DraftKings may have captured some additional share,” said J.P. Morgan gaming analyst Daniel Politzer.
In a statement, Boston-based DraftKings said it lost 69 cents per share for the three months ended Dec. 31, missing the 49 cents-per-share average loss forecast by Seeking Alpha. Year-to-year comparisons are inexact because the company formed and went public last April.
Revenue was $322 million, up 145.8% from a year earlier, to smash the $232 million forecast of Seeking Alpha-polled analysts.
Monthly unique payers in DraftKings’ consumer segment increased 44% in the fourth quarter from a year earlier to 1.5 million. The average revenue per monthly unique payer was $65 in the quarter, a 55% year-to-year jump.
In a conference call with analysts, DraftKings CEO Jason Robins said the post-COVID-19-lockdown return of major professional sports, including the National Basketball Association, National Hockey League, and Major League Baseball, and the start to the National Football League season, boosted customer engagement.
DraftKings raised its fiscal 2021 revenue guidance from a $750 million-to-$850 million range to a $900 million-top-$1 billion range, which would exceed the $867.7 million Seeking Alpha estimate.
“We think the results were broadly encouraging as DraftKings continues to command a dominant share in sports betting and has increased its relevance in iCasino, as evidenced by the quick ramp in Pennsylvania,” said Deutsche Bank gaming analyst Carlo Santarelli. “Additionally, DraftKings continues to benefit from favorable legislative headlines and the broader thematic investment community dynamics.”
DraftKings said it raised its estimate because Michigan and Virginia introduced mobile sports betting with the assumption that all professional and college sports calendars that have been announced happen (a big if with the coronavirus pandemic far from resolved). The forecast doesn’t factor in new states legalizing sports betting.
DraftKings’ momentum has been mounting. DraftKings expanded the states with its online sportsbook to 12 by adding Virginia in January. In a conference call with analysts, Robins noted that those 12 states represent a quarter of the U.S. population.
“The outlook for further legalization is also very promising,” Robins said.
So far in 2021, he said, 19 state legislatures have introduced legislation to legalize online sports betting, five state legislatures have introduced legislation to expand existing sports wagering and one state legislature introduced legislation to legalize sports betting, limited to retail locations.
Investor’s Business Daily noted that high-profile exchange-traded funds manager Ark Invest’s buy of 620,300 shares and Google’s decision to add sports betting apps in its Play store starting Monday may further stoke DraftKings’ rise.
Analysts have backed DraftKings’ stock bullishly. on Jan. 26, Goldman Sachs upgraded DraftKings to “buy” from “neutral” and raised its price target for the stock to $65 from $45. The same day, Bernstein began coverage, rating DraftKings “outperform” and set a $71 price target for 2021.
Oppenheimer on Feb. 19 raised its 2021 DraftKings price target to $80 from $65, keeping an “outperform” rating.
If that wasn’t exciting enough, there’s the announcement of Ripken’s special board adviser spot, which comes five months after basketball superstar Michael Jordan took a similar role. Both athletes agreed to take an equity stake in the company with their advisory roles.
National Football League owners Robert Kraft (New England Patriots) and Jerry Jones (Dallas Cowboys) and Legends Hospitality, an investment vehicle launched by the Cowboys and baseball’s New York Yankees are also stakeholders.
Follow Matthew Crowley on Twitter @copyjockey
