DraftKings The 'King Of The Beat & Raise': 7 Analysts Size Up Q1 Earnings, Raised Guidance That Could Be Conservative

Zinger Key Points
  • DraftKings reported first-quarter results that were better than expected by analysts.
  • Analysts size up the results and what's next.

Sports betting company DraftKings Inc DKNG reported first-quarter revenue and earnings per share that beat analysts' estimates.

Analysts share their reaction to the report and DraftKings' raised full-year guidance:

  • Truist analyst Barry Jonas has a Buy rating and $55 price target.
  • Bank of America analyst Shaun Kelley has a Buy rating and $54 price target.
  • Goldman Sachs analyst Ben Miller has a buy rating and $60 price target.
  • Needham analyst Bernie McTernan has a Buy rating and $58 price target.
  • JMP Securities analyst Jordan Bender has a Market Outperform rating and $52 price target.
  • Benchmark analyst Mike Hickey has a Buy rating and raises the price target from $50 to $52.
  • Mizuho analyst Ben Chaiken has a Buy rating and $58 price target.

Truist: Jonas calls the sports betting company the "king of the beat & raise."

"DKNG provided a bright spot in an otherwise dim Q1 earnings," he says. The beat and raise was driven by "strong fundamentals" with almost every underlying metric showing strength.

Bank of America: Investor concerns on sports outcomes in March were minimized with DraftKings' strong hold rate, Kelley said.

Lower promotions, improved hold rate, customer acquisition and gross margins helped with the quarter and guidance, he said.

"We think DKNG remains a rare organic growth story in Gaming and Consumer, and we maintain our Buy rating and $54 PO," Kelley said.

Kelley estimates that DraftKings had a 35.4% online sports betting market share in the United States in the first quarter.

Goldman Sachs: Healthy customer engagement, higher hold and improved promotional spending were highlights in the first quarter for Miller.

The analyst said the expansion of new jurisdictions of Vermont and North Carolina add to the future growth.

"We'd also highlight that DraftKings commented that they are exploring options for capital allocation given the forward FCF trajectory of the business (more to come next quarter, per the company)," Miller said.

Miller said one risk for DraftKings is a slower than anticipated path to legalization for new states.

Needham: Strength in customer acquisition, retention and engagement helped offset customer-friendly outcomes in March, McTernan said.

"Overall, DKNG continues to show strong operating performance in a compelling end market," McTernan said.

The analyst said DraftKings is showing a fast path to profitability with commentary that North Carolina and Vermont would contribute to positive adjusted EBITDA in the second half of 2024.

JMP Securities: Headwinds in sporting outcomes couldn't keep DraftKings' results or guidance down, Bender said.

"The scale of the overall company benefited results, including the large product offering smoothing out gaming margins during the Super Bowl, protecting it from downside and unfavorable results, unlike its comps," Bender said.

The analyst said the growth of monthly unique payers (MUPs) was lower than recent quarters, but came without a full quarter of the new state launch in North Carolina, which was on March 11.

"We expect the outlook to be conservative if the company can maintain market share, and assuming no large, unfavorable sporting outcomes in the upcoming quarters."

Benchmark: The first quarter provides a strong start to DraftKings' fiscal year, Hickey said.

The analyst said new state launches, increased customer acquisition and improved hold rates helped with the first quarter results.

"The company was able to raise guidance above consensus due to stronger-than-expected customer acquisition and retention, operational efficiencies, and an increased structural sportsbook hold percentage, leading to higher revenue and profitability projections," Hickey said.

Mizuho: Revenue growth for DraftKings is trending better than expected due to demand, Chaiken said.

The analyst highlighted lower promotional spending in the first quarter.

"We assume much more moderate declines for the rest of the year, but it's a great sign," Chaiken said.

Chaiken said DraftKings is showing strong operating leverage in the results.

DKNG Price Action: DraftKings shares are down 2.7% to $41.87 on Friday versus a 52-week trading range of $22.65 to $49.57.

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