DraftKings (DKNG) Stock Plummets on Monthly Users Miss and Poor Profit Outlook, Analyst Reaction Mixed

Shares of DraftKings (NASDAQ: DKNG) plunged around 16% in premarket trading Friday even though the company reported Q4 2021 results that beat analyst consensus.

The company reported revenue of $473 million in the fourth quarter, topping the analyst consensus of $444.4 million. The average revenue per monthly unique payer totaled $77, compared to the consensus estimates of $68.94.

For the full-fiscal 2022, DraftKings boosted their revenue guidance to $1.85 billion - $2.0 billion range and also introduced guidance for Adjusted EBITDA of negative $825 million to $925 million.

"We grew revenue 47% year-over-year to $473 million in the fourth quarter despite lower-than-expected hold in October primarily due to NFL game outcomes,” said the company’s CFO Jason Park.

Goldman Sachs analyst Stephen Grambling said the top and bottom line results were “encouraging,” as well as commentary on positive EBITDA.

However, “the downward guide vs. Consensus on adj. EBITDA will likely outweigh these factors and put pressure on the stock, especially given California and Canada could equate to substantial required investments. That said, if DKNG's guidance ends up reflecting a willingness to take a more rational approach, similar to peers, the guidance could provide a floor,” Grambling wrote in a client note.

Needham & Company analyst Bernie McTernan reiterated a Buy rating following results.

“While 4Q'23E is still a long ways away and there are assumptions on market access between now and then, we think this tangible outlook for adj. EBITDA better helps frame the trajectory of adj. EBITDA losses improving. We note, we expect DKNG to be adj. EBITDA positive in '24E,” the analyst said in a memo.

By Senad Karaahmetovic | [email protected]

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