Bet on DraftKings Stock?

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The rise Of the IGaming Industry in the US is kicking off. Betting companies, such as: $DKNG $PENN $RSI, are growing revenue at 30%-40% a year. Should investors consider adding companies from this lucrative industry to their portfolios?

The Rise and Fall of DraftKings Stock Price.

DKNG Stock Chart

2020 and 2021 for the most part have been great times to own growth stocks. From IPO price (in April 2020) Draftkings raised an outstanding +300% in just a year and a half. However the story nowadays is very different, DKNG is -80% off its highs and -52% YTD. Obviously macro environment and market sentiment changed since its highs back in Sept 2021, nevertheless it begs the question: “Is this an opportunity to load up on some DKNG shares?” The rest of this article will be a look at their recent 2022 Q1 earnings and my thoughts on DraftKings as a whole. (With the need to mention that this is not in any way financial advice)

Latest 2022 Q1 Earnings

DraftKings Reports First Quarter Revenue of $417 Million; First Quarter B2C Segment Revenue Increases 44% YOY and Company-Wide Adjusted EBITDA Exceeds Midpoint of Guidance by More Than 12%

Compared to expectations, Draftkings beat on revenue by 1%($417M compared to $414M estimate) however reported a wider ADJ. EPS ($1.22 vs $1.16 expected). This sort of mixed earnings has been a recurring pattern for DraftKings. Summary of company news:

  • Monthly unique players increased 29% year-over-year to 2 million monthly unique paying customers.
  • Average revenue per user was up 11% to $67.
  • 44% YoY B2C revenue growth in Q1.
  • Rise of guidance for the year 2022. Revenue $1.93B to $2.03B. vs. a prior view for $1.85B to $2.0B and adjusted EBITDA loss of $760M to $840M vs. -$913M consensus.
  • Acquiring Golden Nugget

An outlook on the future of Draftkings

DraftKings Products in the US

With mobile sports betting in just 17 states (approximately 36% of the U.S. population) the path for growth is clear as day. The opportunity of increasing the user base is huge. However this expansion into new states will come with a lot of money spent on promotions and advertisements. Needless to say online betting is a very competitive market and as states legalize it more companies will get involved. This is why DraftKings is currently a money losing business and will stay like that for another couple of years. In fact, DraftKings are expected to reach profitability from 2025 onwards according to analysis. However, Revenue is expected to grow to $4.7B in 2026.

The questions investors should be asking themselves before investing in DraftKings Stock are: “Will there be DraftKings in 5yrs?”, “Am I willing to hold for 5+ yrs?”. If the answer for both of these questions is yes, I suggest adding a few shares of Draftkings over a long period of time. There is no real rush to invest in money losing technology stocks in this type of market. Most growth stocks have seen their valuations get slashed in half over the start of 2022.

In my view, most of these growth companies will still go on to change the world and disrupt industries. This is why I continue to buy DraftKings stock and others on market dips. As a long term investor, I see these periods of market uncertainty as great buying opportunities for my personal strong conviction stocks.

(Thanks for reading my first Article written on Medium :) )