DraftKings Stock Investors Pull Back After Q1 Earnings: What Do Analysts Think?

DraftKings Stock Investors Pull Back After Q1 Earnings: What Do Analysts Think?

Draftkings Inc DKNG shares were retreating Monday after the company reported a better-than-expected loss in the first quarter and raised its full-year guidance.

For the first quarter, DraftKings reported a 36-cent EPS loss on Friday, beating the 41-cent loss analysts expected. DraftKings also reported $312 million in revenue, ahead of the $236-million consensus analyst estimate. Revenue was up 253% from a year ago.

DraftKings reported 1.5 million monthly unique paying customers, beating Wall Street expectations of 1.3 million. Average revenue per monthly unique paying customer was $61, up 48% from a year ago.

DraftKings also raised its full-year 2021 revenue guidance from an old range of between $900 million and $1 billion to a new range of between $1.05 billion and $1.15 billion.

The negative market reaction may be in part because DraftKing’s impressive growth came at a high cost given the company’s first-quarter sales and marketing costs quadrupled year-over-year to $228.7 million. 

DraftKings Analysts On Impressive Growth Numbers: Canaccord Genuity analyst Michael Graham said DraftKings is well-positioned to continue its growth momentum by expanding to more states in 2021.

“We are encouraged by the favorable industry backdrop, as OSB legalization progress has accelerated across the country, and numerous recent strategic partnerships and acquisitions are helping DraftKings develop its media strategy and enhance its product offering,” the analyst said. 

The U.S. online sports betting market is fiercely competitive, he said, adding that DraftKings has an opportunity to continue to generate significant revenue growth for the foreseeable future.

Credit Suisse analyst Benjamin Chaiken said Monday’s weakness is a buying opportunity for long-term investors.

“All in all, we think the weakness in the shares today is an opportunity, given the differentiation of the DKNG product, positive event path in NY (DKNG a leader) and Canada (which likely comes back to Senate in 2-3 weeks), and the savings from fully integrating the SBTech platform,” the analyst said. 

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