DraftKings Earnings Preview: Will Stock Surge Continue After Barstool Deal?

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DraftKings stock

DraftKings is sticking to its approach of releasing its earnings report the night before its call, giving investors time to digest the earnings and see how the stock reacts.

That earnings report comes out Thursday afternoon after the stock market closes at 4 pm. DraftKings will then hold its 2023 full year earnings call at 8:30 am Friday.

One thing investors do not want is to see the share price slide on short-term hiccups.

DKNG closed Monday at $43.61, the same day it confirmed its long-rumored deal with Barstool. That is up 23.7% from the $35.25 closing price to end 2023 and more than 170% from the closing price a year earlier.

Could low Q4 hold move DKNG stock?

DraftKings saw better than expected adjusted EBITDA over the first three quarters on 2023, but that may not be the case for the fourth.

Multiple operators including Caesars and FanDuel have called out customer-friendly results in the quarter that dragged their results. That could impact the $200 million in adjusted EBITDA the company said it expected in the fourth quarter.

Caesars pre-reported fourth quarter results with digital adjusted EBITDA of $28 million to $30 million expected. That could have been about double without those customer-friendly results, the company said.

FanDuel, a closer comparison to DraftKings than Caesars, said quarterly revenue was negatively impacted by $343 million. That led to revenue that was $225 million below guidance provided in the third quarter, or almost $79 million in adjusted EBITDA missing at a 35% flow through.

Will DraftKings Super Bowl data help?

Whether DraftKings chooses to get into Super Bowl betting data on Friday’s call could be a signal to how the company performed. DraftKings technically does not have to do so because the Super Bowl is a Q1 event, but CEO Jason Robins could drop a few positive crumbs in, especially if those Q4 results are lower than expected.

Analysts have so far been mixed on what to expect. Chad Beynon of Macquarie expects multiple operators to report net revenue losses from the Super Bowl, including DraftKings.

Eilers & Krejcik, on the other hand, thinks same-game parlays saved the day for DraftKings and FanDuel:

“On that front, we est. that @FanDuel and @DraftKings achieved mid-teens hold percentages and met or even exceeded internal handle targets,” said Chris Krafcik, the managing director of sports betting and emerging verticals at E&K.

DraftKings VIP issue not affecting stock yet

The multiple court battles that have spawned between DraftKings and a new Fanatics employee since the beginning of the month have not hurt the DraftKings stock yet.

Michael Hermalyn is the former head of VIP operations for DraftKings and accepted a job with Fanatics. The two sides are left arguing whether Hermalyn is still held to his non-compete agreements even though he says he is now a California resident, where such agreements are not recognized.

He remains under a temporary restraining order granted in Massachusetts which prevents him from sharing DraftKings trade secrets and from contacting their customers.