DraftKings stock suffers worst day on record as ‘patience remains thin’ with gambling company’s losses

Shares of DraftKings Inc. suffered their worst daily performance on record Friday, after the sports-betting company topped revenue expectations but appeared to spook investors with its discussion of continued losses.

While DraftKings
DKNG,
-27.82%

saw its losses narrow a bit in the latest quarter and upped revenue expectations for the full year, executives also offered a 2023 forecast for a loss of $475 million to $575 million on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda). The company is aiming for positive adjusted Ebitda in the fourth quarter of 2023.

Taken together with the implied outlook for fourth-quarter adjusted Ebitda losses that can be derived from DraftKings’ 2022 forecast, the company’s “guidance implied another $600-700 million of Ebitda burn before turning profit in 4Q23,” Jefferies analyst David Katz wrote in a note to clients Friday.

Katz is still bullish on DraftKings’ prospects, but seemed to acknowledge why some investors would react negatively.

“While liquidity should not be a concern with a cash balance at ~$1.4 billion, current market patience remains thin,” Katz noted.

Chief Executive Jason Robins addressed the outlook on the DraftKings earnings call, noting that the company is now guiding to a better 2022 Ebitda loss projection than what it had offered earlier in the year. He said that the company will aim to improve relative to initial 2023 targets as well.

“I think it’s the same thing here where we’re guiding to what we feel like we currently have line of sight to and can make a commitment to,” he said. “We very much view our credibility as the most important thing, and I want to make sure we’re never signing up to a number that we don’t think we can achieve. But we always go out there and try to do better, too, and I think 2022 is a great example of that.”

DraftKings shares declined 27.8% Friday, their largest single-day percentage decline on record, topping a 23% plunge on March 12, 2020. For the year, DraftKings shares have fallen 58.8%, while the S&P 500 index
SPX,
+1.36%

has declined 22%.

Source: https://www.marketwatch.com/story/draftkings-stock-heads-for-worst-day-on-record-as-patience-with-losses-remains-thin-11667582679?siteid=yhoof2&yptr=yahoo