The stock was on fire Friday, up 14%
DraftKings (NASDAQ:DKNG) stock jumped some 14% on Friday after the online sports betting company delivered sturdy fourth quarter earnings and raised its outlook for 2025.
DraftKings generated $1.4 billion in revenue in the fourth quarter, a 13% increase year-over-year. This was roughly in line with analysts’ expectations.
The firm had a $134 million net loss in the quarter, or 28 cents per share, which was more than the $44 million net loss in the same quarter a year ago. This was due to higher expenses across the board, including sales and marketing, technology, and general and administrative.
But there were some bright spots on the earnings front for this sports betting and iGaming stock, as the stock soared some 14% to $53 per share.
Major profitability milestone in 2024
It is not unusual for young, growing companies to be unprofitable, particularly those that rely heavily on technology, like DraftKings. They need to invest a lot of money in technology, marketing, and staff to get the business of the ground and growing. This is where DraftKings has been as it travels the road to profitability.
From an adjusted EBITDA standpoint, which is a non-GAAP measure of earnings that excludes non-recurring or non-operational items, DraftKings generated $89.5 million in net income, or 14 cents per share. This was down from $151 million a year ago, or 29 cents per share, but it was far better than the -1 cent per share adjusted EBITDA that analysts had anticipated.
When you pull back the lens and look at the entirety of 2024, DraftKings reached an important milestone. It generated $181.3 million in adjusted EBITDA for the full year, up from a $151.0 million net loss in fiscal 2023.
“2024 was a milestone year for DraftKings as we achieved our first year of positive Adjusted EBITDA. Additionally, we began executing on our inaugural share repurchase authorization,” Alan Ellingson, DraftKings’ CFO, said.
Looking at some of the key metrics in Q4, DraftKings saw its monthly unique payers (MUPs) increase to 4.8 million, up 36% from the fourth quarter of 2023. This was due to effective retention efforts, as well as the expansion of its sportsbook into new jurisdictions. It was also helped by the acquisition of lottery app Jackpocket. Without Jackpocket, MUPs would have increased by only 16% compared to the fourth quarter of 2023.
However, the average revenue per MUP dropped 16% to $97 in Q4. This was due mainly to lower ARPMUP for Jackpocket customers compared to sportsbook customers. It was also due to a lower hold rate for the sportsbook due to customer-friendly outcomes, which is a corporate way of saying, bettors did pretty good. Minus the impact of the Jackpocket acquisition, ARPMUP decreased approximately 4%.
DraftKings raises its guidance for 2025
DraftKings got several price target upgrades from analysts post-earnings. Benchmark raised its price target for DraftKings to $51 per share and put it on its “best ideas” list. DraftKings already passed that number, as the stock rose 14% on Friday to $53 per share. Susquehanna raised it by $7 to $61 per share, while Cannacord bumped it up $6 to $60 per share. That would be about a 17% increase from the current price.
Analysts are likely basing these moves off DraftKing’s 2025 guidance. The company calls for revenue in the range of $6.3 billion to $6.6 billion, up at the low end from the previous guidance of $6.2 billion to $6.6 billion. That equates to approximately 35% year-over-year growth at the midpoint. It also reaffirmed its 2025 adjusted EBITDA guidance of $900 million to $1.0 billion, which is well up from $181 million in 2024. The firm is rapidly improving its earnings and moving toward GAAP profitability.
“Looking ahead to 2025 and beyond, I am excited to further enhance our customer economics through new initiatives such as extending our lead in live betting and advancing cross sell efforts to and from new verticals,” CEO Jason Robins said. “Our focus remains on driving sustainable growth in revenue and profitability.”
DraftKings sportsbook is currently available in 25 states and Washington, D.C., reaching 49% of the U.S. population. In 2025, it is expected to add Missouri and Puerto Rico to that list. Further, its iGaming app is now in 5 U.S. states, and its sportsbook and iGaming apps reach 40% of the Canadian population.
The stock is on fire today, so it may not be the best time to jump on it. But there’s a lot to like about where DraftKings stock is heading, so look for a dip.
