The return of the NCAA men’s basketball tournament and the National Football League’s Super Bowl and the promise of expanding sports betting had fantasy sports giant DraftKings, which was already thinking big, thinking even bigger.
After issuing a possibly gasp-inducing $1 billion guidance for 2021 revenue during its fourth-quarter report in February, DraftKings went even higher Friday, raising the range from $1.05 to $1.15 billion.
A 252% rise in revenue and a 48% jump in average revenue per user (to $61) fueled DraftKings’ forecast even as the company reported a first-quarter loss.
In a 10-Q filed with the Securities and Exchange Commission, DraftKings said its net loss was $346.3 million, or 87 cents per diluted share, for the three months ended March 31, compared with a year-earlier loss of $68.7 million, or 37 cents per diluted share.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, surged to $139.3 million from $49.5 million.
As mentioned, revenue surged, rising to $312.3 million from $88.5 million and topped the $237.28 million average forecast of analysts polled by Seeking Alpha.
PlayUSA.com told Investors Business Daily that 80% of the $500 million wagered on February’s Super Bowl was bet online and the 16-day tournament’s handle came for March’s NCAA Tournament was about $1.6 billion.
“We are seeing nothing but incredible momentum in the business right now,” CEO Jason Robins told Bloomberg Television on Friday. “Sports being back in full swing is driving a lot of that.”
Coronavirus pandemic-delayed starts will have the National Basketball Association and National Hockey League playoffs extending from the second quarter into the third, Robins told Bloomberg TV. And, in the company’s conference call with analysts and journalists, Robins said his company is live with online sports betting in 12 states that collectively represent 25% of the U.S. population.
Six states representing approximately 11% of the U.S. population have legalized some form of iGaming, Robins added, saying that DraftKings is live in four states, representing approximately 10% of the U.S. population.
Moreover, he said, more than 20 U.S. state legislatures have introduced legislation to legalize online sports betting in 2021, five state legislators have introduced legislation to expand existing sports wagering and one state legislature introduced legislation to legalize sports betting limited to retail locations.
“We believe the outlook for further legalization is very promising,” he said.
In a separate interview with Yahoo Finance, Robins said the idea that people might bet and use DraftKings less when they’re vaccinated and can leave home hasn’t played out so far.
“It’s certainly something we’re keeping our eye on,” Robins said. “(It’s) hard to say, we’re kind of in uncharted waters now. I don’t think anybody really knows how the overall return to normalcy, whatever that looks like, will go.”
Despite the results and guidance, investors sold off DraftKings shares Friday. The stock dropped $3.47, or 6.69% to close at $48.42. The shares are up 7.4% in 2021.
And Investor’s Business Daily reported that marketing costs may represent a speed bump. The newspaper reported that DraftKings spent $184 million on sales and marketing in the fourth quarter, nearly tripling the $63 million it spent a year earlier. And DraftKings Chief Financial Officer said the company expects to spend more on marketing in 2021 than in 2020.
But Jefferies analyst David Katz told Barron’s on Friday that he maintained his “buy” rating and $75 price target on the stock, based on DraftKings’ potential to expand as legal online betting rolls out in new states.
“The continued progression of beat and raise quarters, coupled with strategic substantiveness should draw a positive reaction in the shares and supports our bullish stance on the name,” Katz wrote.
Follow Matthew Crowley on Twitter @copyjockey.
