DraftKings (DKNG) reported mixed Q3 results early Friday, as the online sports betting company sees more states legalize gambling. DKNG stock rose on strong guidance.
DraftKings Earnings Report
Estimates: Analysts expected a loss of 63 cents a share on revenue of $132.2 million, according to Zacks Investment Research.
Results: DraftKings lost a net 98 cents a share, though the adjusted loss was 57 cents, according to Refinitiv. Revenue came in at $132.84 million. That’s up 98% vs. a year earlier, or 42% on a pro forma basis.
Monthly unique users topped 1 million, up 64% vs. a year earlier.
“The resumption of major sports such as the NBA, MLB and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement,” DraftKings CEO Jason Robins said in the earnings release.
Outlook: The sports betting specialist now sees full-year revenue of $540 million to $560 million, up from a prior range of $500 million to $540 million. That would be a pro forma gain of 25%-30%. Analysts had forecast 2020 revenue of $530 million.
DraftKings gave initial 2021 revenue guidance of $750 million to $850 million, a 45% gain at the midpoint. Wall Street had penciled in $780 million.
DraftKings gave a sneak peak into Q3 results in an S-1 filing in October. It said, “atypical hold rates from NFL wagering during the three months ended September 30, 2020, resulted in an estimated negative impact on revenue of approximately $15 million based on our historic average hold rate for online sports betting of approximately 6.5%.”
Low hold often results from a high number of favorites paying off for bettors. Essentially, they paid out more bets than anticipated.
While DraftKings is best known for online sports wagering, it’s also making a significant push into casino games through its iGaming application.
“Total U.S. iGaming handle increased 335% year-over-year, and we estimate represented about half of total online gambling revenue,” wrote Evercore analyst Kevin Rippey in a recent note.
The iGaming application is part of a partnership with Hollywood Casino at Penn National Race Course, a Penn National Gaming (PENN) property.
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Shares pared gains sharply before closing up 3.85% at 42.84 on the stock market today. DraftKings stock, which has an RS Rating of 97 out of a possible 99, is well below its 50-day moving average, according to MarketSmith chart analysis.
DKNG stock rallied after several states passed gambling legislation on Nov. 3. Most notably, Maryland voters approved a measure to legalize sports wagering at licensed facilities. DraftKings and rival Flutter Entertainment (PDYPF)-owned FanDuel spent millions lobbying in favor of the measure. Colorado, Louisiana and Nebraska also legalized sports betting.
Among other gambling stocks, Penn National Gaming, which recently acquired Barstool Sports, rose 3.4% Friday. Caesars Entertainment (CZR) rallied 6.2%, and MGM Resorts (MGM) jumped 9.3%.
DraftKings has also been forging partnerships with various sports franchises and media firms. But with professional sports seasons shortened and schedules upended by Covid-19 cases among players and staff, online sports betting has struggled.
In October, DraftKings signed a deal to integrate its content with AT&T’s (T) Turner Sports platforms. The agreement made DraftKings the exclusive sportsbook and daily fantasy sports provider across select Turner Sports and Bleacher Report properties.
The deal excludes content surrounding the National Basketball Association since Turner has already agreed to a separate deal with rival FanDuel to integrate that content. Financial terms of the deal were not disclosed.
DraftKings also inked deals with various star athletes, sports franchises and media companies. It has teamed up with basketball legend Michael Jordan, the NFL’s New York Giants, MLB’s Chicago Cubs and Disney’s (DIS) ESPN.
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Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.