DraftKings Again Raises Revenue Outlook, Q2 EBITDA Beat Excites Analysts

DraftKings (NASDAQ:DKNG) again increased its full-year revenue outlook today following a strong set of second-quarter results, which the company delivered earlier.

The sportsbook operator now expects 2021 sales of $1.21 billion to $1.29 billion, up from the guidance of $1.05 billion to $1.15 billion issued in May. That new outlook was helped by a strong showing in the April through June period in which DraftKings generated revenue of $298 million. That beat Wall Street estimates by $50.78 million, and represents a 320 percent year-over-year increase.

While the gaming company lost 76 cents per share — 18 cents worse than analysts expected — adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of -$95 million was better than the loss of $115 million that was the consensus estimate.

Average revenue per monthly unique player (MUP) was $80 in the June quarter, good for a 26 percent increase from the same period last year.

The quarter continues to demonstrate better than expected execution and broadening areas of growth for the future,” said Jefferies analyst David Katz in a note to clients today.

Shares of DraftKings are higher by almost two percent, but the stock was up as much as seven percent in pre-market trading on the back of the second-quarter results.

Important Tea Leaves in DraftKings Revenue Guidance

While DraftKings has delivered just five earnings reports since becoming a freestanding public company in April 2020, one thing analysts and investors have gotten used to is the operator losing money and estimating a long time line to profitability.

The raised sales guidance “reflects strong performance in the second quarter of 2021 and continued user retention, engagement, and acquisition due to the effectiveness of our marketing spend,” said the company in a statement.

As Macquarie analyst Chad Beynon notes, DraftKings new sales outlook, at the midpoint of the range, is 14 percent above the prior forecast and follows a 16 percent increase from the first quarter and a 19 percent bump in the last three months of 2020. He rates the stock “outperform” with a $72 price target. That implies upside of approximately 44 percent from the Aug. 5 close.

Legislative, Sports Calendars Cooperative

Following an unusual sports schedule last year, the result of shutdowns and suspensions forced by the coronavirus pandemic, the domestic sports slate is normalizing. DraftKings acknowledges its revenue projection depends on no unforeseen disruptions to the sports schedule.

On the state front, the operator is live with mobile sports betting in a dozen states covering a quarter of the US population while it has its internet casino offering in four states representing 10 percent of the population.

There’s a chance DraftKings 2021 revenue could top estimates, because several states where it has online sports betting (OSB) agreements are likely to go live in the coming months.

“Six of the states where DKNG has market access agreements — Arizona, Connecticut, Louisiana, Maryland, New York, Wyoming — have already authorized OSB this year. These states represent 13% of the US population, and bring the percentage of the population with legalized OSB to 39%. In addition, Connecticut has authorized iGaming,” said Macquarie’s Beynon.

Of that group, Arizona and Wyoming are likely to be operational for the 2021 NFL season, with Louisiana and Maryland also angling for autumn launches.