DraftKings is the IBD Stock Of The Day for Monday. The fantasy and sports betting platform is on a massive win streak as DraftKings stock rocketed 170% so far this year as of July 21. And DKNG shares could parlay a recent breakout into another entry opportunity.
Boston, Mass.-based DraftKings operates in 23 states where sports betting is legal as well as Ontario, Canada and Puerto Rico. Currently, 34 states and Washington, D.C., allow some form of legal sports betting, according to the American Gaming Association. Four more states including Maine, Vermont, Kentucky and Florida legalized sports betting as of late June but have yet to officially launch.
DraftKings is drawing more adults to its online casino, and paying less to get them to play.
Monthly unique players grew to 2.8 million in Q1 from 1.5 million last year with the average revenue per monthly unique player increasing to $92 from $67 during that time. New users increased 57% year over year during the first quarter. Meanwhile, DraftKings' customer acquisition costs, which are spent on promotions and advertisements, fell 27% year over year.
It launched its mobile sports betting offerings in Ohio and Massachusetts in the first quarter. The company said it already acquired at least 7% of the adult population in Ohio and 6% of the adult population in Massachusetts through May 4.
Is DraftKings Stock A Buy Or Sell Right Now As More States Legalize Sports Betting?
DraftKings is also taking a larger share of the iGaming market. The company's share of the mobile sports betting market rose to 32% in Q1 vs. 28% last year. Its gross gaming revenue share was the largest in the U.S. for the period, at a Q1 record of 26%.
DraftKings scrapped its bid to acquire rival PointsBet on June 28 after increasing its proposal by 30% to a $195 million all-cash offer on June 16. The company was competing against rival online sports retailer Fanatics.
DraftKings Earnings
The company's year-over-year losses declined the past four quarters while revenue averaged 89.5% gains during that time. DraftKings topped expectations for its Q1 results in early May and raised its 2023 outlook.
The gambling company raised the midpoint of its fiscal 2023 revenue guidance by 8% to $3.185 billion. It also raised its 2023 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) outlook by $85 million to a loss of $315 million.
For its Q2 results, due late Thursday, DraftKings predicts it will roughly break even on adjusted EBITDA and expects an increase to nearly $150 million by Q4, with positive gains continuing in 2024.
But Wall Street is still taking the under when it comes to earnings results. Analysts polled by FactSet expect earnings to improve to an adjusted loss of 13 cents per share compared to a loss of 29 cents per share last year. Revenue is seen spiking 59% to $744 million.
DraftKings Stock
DKNG is a member of the IBD 50 list of top growth stocks as well as Leaderboard.
On May 18, DraftKings joined Leaderboard after clearing a trendline entry near 23.75. It rallied more than 20% to trade in a profit-taking zone after testing support at the 21-day exponential moving average. Shares overcame resistance around its 26 to 27 range but made measured pullbacks in May and June after surging out of a buy zone on Q1 results.
DraftKings stock has rallied nearly 16% in July. Shares traded tightly the past two weeks and are showing signs of a short stroke. A potential follow-on entry emerged at 31.71.
DraftKings shares have an 87 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. However, the company's consistent quarterly losses earn it a meager 47 EPS Rating. DraftKings' relative strength line at its highest levels since late 2021 and it has a near-perfect 98 RS Rating.
DraftKings stock fell 1.5% to 30.61 Monday.
