Wednesday, September 21 2022

DraftKings Inc. Stock (NASDAQ: DKNG), a $15.1 billion sports entertainment and gaming company, rose 9.8% to close at $17.96 on Friday after posting upbeat second-quarter results and higher guidance for 2022.

DraftKings’ losses in the quarter were 49.3% lower than the consensus estimate, and its sales exceeded Street’s estimate by 6.3%.

A preview of the Q2 results from DraftKings

During the quarter, the company reported a per share loss of $0.38 per share, versus a consensus estimate of $0.75 per share. Its adjusted loss was $0.29 per share in the second quarter of 2022 and $0.26 per share in the second quarter of 2021.

Revenue was $466.2 million, up from the consensus estimate of $438.6 million. Additionally, revenue increased 56.6% year-over-year, driven by a 68.3% increase in B2C segment revenue. However, sales in the B2B segment were down 58.2% year-over-year.

It is worth mentioning that the average number of monthly single payers (MUPs) increased by 36.4% year over year, while the average revenue per MUP increased by 28.8% in the second quarter.

The increase in revenue was more than offset by the increase in costs and expenses. Second-quarter revenue costs increased 67.2% and operating expenses increased 7% year-over-year.

Operating loss in the quarter was $308.9 million, compared to $321.6 million in the prior year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was ($118.1) million compared to ($95.3) million in the second quarter of 2021.

In addition to losses in the quarter, the company’s cash positions were weaker compared to the end of 2021. Cash and cash equivalents at $1,514.4 million were down 29.7% from at the end of 2021. This included the impact of free cash flow of ($529.3 million) from operating activities, $14.5 million spent on capital expenditures, $96.5 million dollars paid in cash for acquisitions and $17.5 million used to purchase treasury stock.

DraftKings projections for 2022 are impressive

For 2022, DraftKings expects revenue to be in the $2.08-2.18 billion range, which is higher than the previously estimated $2.055-2.175 billion. The revised expectation reflects an increase of 60% to 68% over the previous year.

Additionally, the company expects Adjusted EBITDA to be in the range of (765) to (835) million dollars compared to the range of (810) to (910) million dollars previously reported.

DraftKings Co-Founder, CEO and Chairman of the Board, Jason Robins, said, “Due to our continued investment in core online gaming technologies, we are in a position of strength from a point of competitive view as the start of the NFL season approaches. . We remain well capitalized, ready to enter new markets as they become active, and confident in our ability to compete with our customers and win with them.

Website traffic hints at the strength of DraftKings

According to TipRanks, the total number of visits to the DraftKings website is expected to have increased by 47.7% year over year in the second quarter of 2022. The increase in traffic reflects the company’s outlook. Find out how Website Traffic can help you find your favorite stocks.

Is DraftKings a buy or a sell?

DraftKings could be a good investment option for long-term investors. On TipRanks, the company has a moderate buy consensus rating based on 12 buys and five takes.

The company’s revenue outlook is strong, as evidenced by its upbeat performance in the second quarter and its increased sales guidance for 2022. Additionally, effective management of its costs and expenses would help improve business performance in the coming quarters.

DKNG’s average price forecast of $25.81 suggests upside potential of 43.71% from the current level. Given the upside potential, long-term investors could use the current low prices to gain exposure to DKNG stock, which has lost 35.3% year-to-date.

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