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Draftkings Inc (DKNG)
:DKNG
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DraftKings
(NASDAQ:DKNG)
Rating:65Neutral
Price Target:
$43.00
▲(4.07%Upside)
Positive Factors
Financial Performance
DKNG has seen its hold rate improve with New York weekly data suggesting continued improvement.
Market Presence
DraftKings and FanDuel together represent ~70% of the state's handle, indicating strong market presence.
Market Strategy
DraftKings is optimistic about future iGaming legislation due to constructive conversations and potential state funding needs.
Negative Factors
Legislative Challenges
There is some risk in New Jersey's legislative changes, but DraftKings is optimistic that the final tax rate increase may be lower than the current proposal.
Revenue Impact
The new tax in Illinois could lead to a $30 million to $40 million impact on DraftKings' adjusted EBITDA.
Tax Impact
An Illinois tax hike will increase taxes on online sports book operators, resulting in significant financial challenges for DraftKings.
DraftKings (DKNG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$36.75B
Dividend YieldN/A
Average Volume (3M)9.62M
Price to Earnings (P/E)―
Beta (1Y)1.91
Revenue Growth22.86%
EPS Growth30.40%
CountryUS
Employees5,100
SectorConsumer Cyclical
Sector Strength56
IndustryGambling, Resorts & Casinos
Share Statistics
EPS (TTM)-0.07
Shares Outstanding496,285,640
10 Day Avg. Volume10,676,182
30 Day Avg. Volume9,623,266
Financial Highlights & Ratios
PEG Ratio0.21
Price to Book (P/B)3.76
Price to Sales (P/S)0.00
P/FCF Ratio-6.82
Enterprise Value/Market Cap0.14
Enterprise Value/Revenue0.27
Enterprise Value/Gross Profit2.60
Enterprise Value/Ebitda-5.06
Forecast
1Y Price Target
$53.92Price Target Upside30.49% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering27
DraftKings Business Overview & Revenue Model
Company DescriptionDraftKings Inc. operates a digital sports entertainment and gaming company. It offers multi-channel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries. The company operates iGaming through its DraftKings brand in 5 states, as well as operates Golden Nugget Online Gaming, an iGaming product and gaming brand in 3 states. Its Sportsbook is live with mobile and/or retail betting operations in the United States pursuant to regulations in 18 states. The company's daily fantasy sports product is available in 6 countries internationally with 15 distinct sports categories. In addition, it offers DraftKings Marketplace, a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions, as well as owns Vegas Sports Information Network (VSiN), a multi-platform broadcast and content company. DraftKings Inc. was founded in 2011 and is headquartered in Boston, Massachusetts.
How the Company Makes MoneyDraftKings makes money through several key revenue streams. Its primary source of revenue comes from offering daily fantasy sports contests, where users pay entry fees to participate in competitions with the potential to win cash prizes. Additionally, DraftKings generates significant revenue from sports betting, allowing users to place wagers on various sporting events, both pre-game and live. The company also earns money from its iGaming operations, which include online casino games such as blackjack, roulette, and slots. Furthermore, DraftKings benefits from strategic partnerships with major sports leagues, teams, and media organizations, which enhance its brand visibility and expand its customer base. Other revenue sources include advertising and sponsorship deals facilitated through its digital platforms.
DraftKings Key Performance Indicators (KPIs)
Any
Average Revenue Per Unique Payer
Measures the average amount of money each active user spends, indicating the monetization effectiveness and potential for revenue growth from the existing customer base.
Measures the average amount of money each active user spends, indicating the monetization effectiveness and potential for revenue growth from the existing customer base.
Data provided by:
Main Street Data
Main Street DataDraftKings Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: 16.89%|
Next Earnings Date:Aug 01, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong growth in revenue and operational efficiency, as well as a healthy balance sheet and significant progress in live betting. However, customer-friendly outcomes impacted revenue and EBITDA negatively, leading to a downward revision in fiscal year guidance. Challenges in specific markets also contributed to the headwinds.Q1-2025 Updates
Positive Updates
Strong Revenue Growth
DraftKings generated $1.409 billion of revenue in Q1 2025, representing 20% year-over-year growth.
Increased Sports Book Handle
Sports book handle increased 15% year-over-year to $13.9 billion, consistent with expectations.
Operational Efficiency
Promotional reinvestments were more efficient year-over-year, and adjusted gross margin increased more than 100 basis points to 45%.
Healthy Balance Sheet
DraftKings completed Q1 with $1.1 billion in cash after repurchasing 3.7 million shares.
Live Betting Growth
Live betting accounted for greater than 50% of total handle for the first time, indicating strong growth in this area.
Negative Updates
Impact of Customer-Friendly Outcomes
Customer-friendly outcomes in March led to a headwind of $170 million to revenue and $111 million to adjusted EBITDA.
Revised Fiscal Year Guidance
Fiscal year 2025 revenue guidance was revised down to $6.2 billion to $6.4 billion, and adjusted EBITDA guidance to $800 million to $900 million.
Challenges in Certain Markets
Maryland's increased tax rate and Jackpocket's shutdown in Texas and New Mexico were a combined headwind of $30 million to revenue and $26 million to adjusted EBITDA.
Company Guidance
During DraftKings' first quarter 2025 earnings call, the company shared several key metrics and updated guidance. Revenue grew by 20% year-over-year to $1.409 billion, and adjusted EBITDA reached $103 million. The sports book handle increased by 15% to $13.9 billion, with a structural sports book hold percentage of 10.4%, up 50 basis points from the previous year. However, customer-friendly sports outcomes, particularly in March, led to a lower actual hold percentage of 9.5%. Despite this, DraftKings maintained a strong balance sheet with $1.1 billion in cash. For fiscal year 2025, the company revised its revenue guidance to between $6.2 billion and $6.4 billion and adjusted EBITDA to between $800 million and $900 million. The company also anticipates a sports book net revenue margin of 7% to 7.5% and expects free cash flow to reach approximately $750 million.DraftKings Financial Statement Overview
Summary
DraftKings shows strong revenue growth and improved cash flow dynamics but continues to face profitability challenges. The balance sheet reflects moderate leverage, indicating potential for financial stability. Achieving consistent profitability is essential for a more robust financial position.Income Statement
DraftKings exhibits strong revenue growth with a 35.47% increase from 2022 to 2023 and a further 4.9% in the trailing twelve months. However, profitability remains a challenge with negative net profit margins and EBIT margins, indicating ongoing losses. The gross profit margin is relatively healthy at 38.33% TTM, but overall profitability metrics suggest the company is yet to achieve sustainable profitability.55
Neutral
Balance Sheet
The balance sheet reflects a moderate level of leverage with a debt-to-equity ratio of 2.20 TTM, which is manageable for the industry but indicates reliance on debt. The equity ratio is 19.33% TTM, showing a stable proportion of equity financing. However, the negative return on equity at -45.66% TTM highlights inefficiencies in generating returns for shareholders.60
Neutral
Cash Flow
Cash flow analysis shows improvement with positive free cash flow and operating cash flow in the TTM, a significant recovery from previous negative figures. The operating cash flow to net income ratio is positive at 0.93, suggesting better cash management despite net losses. Free cash flow to net income ratio is also positive at 0.99, indicating improved cash flow generation relative to accounting losses.65
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 5.00B | 4.77B | 3.67B | 2.24B | 1.30B | 614.53M |
| Gross Profit | 1.92B | 1.82B | 1.37B | 756.19M | 501.86M | 267.94M |
| EBITDA | -194.13M | -319.35M | -586.65M | -1.27B | -1.40B | -729.44M |
| Net Income | -398.58M | -507.29M | -802.14M | -1.38B | -1.53B | -843.70M |
Balance Sheet | ||||||
| Total Assets | 4.52B | 4.28B | 3.94B | 4.04B | 4.07B | 3.44B |
| Cash, Cash Equivalents and Short-Term Investments | 1.12B | 788.29M | 1.27B | 1.31B | 2.15B | 1.82B |
| Total Debt | 1.92B | 1.34B | 1.35B | 1.32B | 1.32B | 81.61M |
| Total Liabilities | 3.64B | 3.27B | 3.10B | 2.72B | 2.39B | 742.54M |
| Stockholders Equity | 872.91M | 1.01B | 840.31M | 1.32B | 1.68B | 2.70B |
Cash Flow | ||||||
| Free Cash Flow | 393.61M | 407.59M | -115.14M | -729.16M | -517.78M | -385.57M |
| Operating Cash Flow | 369.15M | 417.77M | -1.75M | -625.52M | -419.51M | -337.88M |
| Investing Cash Flow | -566.42M | -566.60M | -90.36M | -208.77M | -195.02M | -227.34M |
| Financing Cash Flow | 259.00M | -144.47M | -63.22M | -16.73M | 1.14B | 2.31B |
DraftKings Technical Analysis
Positive
41.32
Price Trends
36.76
Positive
38.05
Positive
38.91
Positive
Market Momentum
1.76
Negative
60.87
Neutral
65.78
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DKNG, the sentiment is Positive. The current price of 41.32 is above the 20-day moving average (MA) of 39.25, above the 50-day MA of 36.76, and above the 200-day MA of 38.91, indicating a bullish trend. The MACD of 1.76 indicates Negative momentum. The RSI at 60.87 is Neutral, neither overbought nor oversold. The STOCH value of 65.78 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (67)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $6.63B | 13.29 | 35.62% | 0.88% | 6.06% | 10.05% | |
72 Outperform | $3.42B | 192.76 | 11.87% | ― | 29.86% | ― | |
71 Outperform | $50.31B | 97.57 | 5.48% | ― | ― | ― | |
67 Neutral | ¥252.06B | 13.21 | 6.57% | 2.79% | 5.06% | -11.45% | |
65 Neutral | $36.75B | ― | -46.78% | ― | 22.86% | 30.40% | |
61 Neutral | $2.75B | ― | -2.81% | ― | 5.51% | 92.46% | |
60 Neutral | $6.16B | ― | -5.56% | ― | -1.25% | -130.83% |
* Consumer Cyclical Sector Average
Performance Comparison
DKNG
DraftKings
41.32
4.25
11.46%
BYD
Boyd Gaming
81.39
27.89
52.13%
PENN
Penn National Gaming
18.61
-1.01
-5.15%
CZR
Caesars Entertainment
29.64
-7.54
-20.28%
RSI
Rush Street Interactive
14.92
6.36
74.30%
FLUT
Flutter Entertainment PLC
282.33
87.17
44.67%
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
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.