DraftKings stock soars after Q4 revenue beat, narrower-than-expected loss

DraftKings (DKNG) stock soared Friday morning after the sportsbook operator outlined a narrower-than-anticipated loss in 2023 and a path to profitability by 2024 during its fourth-quarter earnings call.

“I am very excited about 2023.” DraftKings CEO Jason Robins said on Friday’s earnings call. “We are more focused than ever on expense management. Since our previous earnings call in November, we have made surgical decisions backed by strong analysis about our expenses and action items.”

The company’s cost-cutting focus will lead to smaller than initially expected losses. DraftKings now expects to a negative adjusted EBITDA within a range of $350-$450 million in 2023. Initially, DraftKings had guided for a $475-575 million adjusted EBITDA loss in 2023. Positive EBITDA will be achieved in 2024, according to the company’s release.

Shares rose as much as 17% in early trading on Friday.

DraftKings also impressed investors with its fourth-quarter results, reporting an adjusted EBITDA loss of $49.9 million. Wall Street had expected the sportsbook to lose more than double that amount. DraftKings lost $0.53 per share in the quarter versus a Street estimate of $0.59.

Here are key numbers from DraftKings’ report, as compared to analysts’ estimates compiled by Bloomberg:

  • Q4 revenue: $855 million vs. $798.64 million expected

  • Q4 Adjusted EPS: -$0.53 vs. -$0.59 expected

  • Q4 Adjusted EBITDA: -$49.9 million vs. -$112.35 million expected

The revenue number represents an increase of 81% over the same period in 2021 and drove a profitable month in October when adjusting for launches in Maryland and Ohio, according to the company release.

“Our revenue was better than our prior guidance, primarily because of structural improvement in our Sportsbook hold and fundamentally better customer trends than we expected,”DraftKings CFO Jason Park told investors on Friday. “Customers are engaging more with our products and are less relying on promotions.”

Increased sports gambling legalization helped drive that growth for DraftKings, which is now operational in 21 states for either retail or online betting. With California no longer coming online during 2023, DraftKings 2023 profitability will become even more focused as the operator saves on opening costs in a major state.

A DraftKings Sportsbook logo is posted on the right field wall of Chicago's Wrigley Field before a game between the Chicago Cubs and Philadelphia Phillies on Sept. 27, 2022. (John J. Kim/Chicago Tribune/Tribune News Service via Getty Images)

A DraftKings Sportsbook logo is posted on the right field wall of Chicago’s Wrigley Field before a game between the Chicago Cubs and Philadelphia Phillies on Sept. 27, 2022. (John J. Kim/Chicago Tribune/Tribune News Service via Getty Images)

“They’ve got a pretty good outlook for state launches this year, so that should allow them to leverage their advertising spend better,” Oppenheimer Managing Director of Equity Research for Consumer Internet Jed Kelly told Yahoo Finance Live ahead of earnings.

He added that “if you can start to show they’re leveraging their advertising spend, you also have the land-based guys being more rational, which is a positive. So I think you see more rationalization in the model — or in the industry. And then you actually start to see advertising leverage and that it could be down year-over-year. I think that’s a positive for the stock.”

This post was updated at 11 a.m. ET on Friday.

Josh is a reporter and producer for Yahoo Finance.

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Source: https://finance.yahoo.com/news/draftkings-stock-soars-q4-revenue-beat-213341779.html