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Category: Draft Kings (DKNG)
Date: 27 January 2021 Stock price of DraftKings (DKNG): $54.06 We take a look at the 3rd quarter 2020 earnings report of DraftKings (DKNG) a digital sports entertainment and gaming company created to fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. The firm has more than 1 million monthly payers. For the quarter the group reported revenues of $133 million and a net loss of $348 million.
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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 - Jason Robins, DraftKings’ co-founder, CEO and Chairman of the Board "
More About DraftKings
DraftKings Inc. (Nasdaq: DKNG) is a digital sports entertainment and gaming company created to fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. Headquartered in Boston, and launched in 2012 by Jason Robins, Matt Kalish and Paul Liberman, DraftKings is the only U.S.-based vertically integrated sports betting operator. DraftKings is a multi-channel provider of sports betting and gaming technologies, powering sports and gaming entertainment for 50+ operators across more than 15 regulated U.S. and global markets, including Arkansas and Oregon in the U.S. DraftKings’ Sportsbook offers mobile and retail betting for major U.S. and international sports and operates in the United States pursuant to regulations in Colorado, Illinois, Indiana, Iowa, Mississippi, New Hampshire, New Jersey, New York, Pennsylvania, Tennessee and West Virginia. DraftKings’ daily fantasy sports product is available in 8 countries internationally with 15 distinct sports categories. DraftKings is the official daily fantasy partner of the NFL, MLB and the PGA TOUR as well as an authorized gaming operator of the NBA and MLB and an official betting operator of the PGA TOUR.
Overview of DraftKings 3rd quarter 2020 earnings report
- Monthly Unique Payers (“MUPs”) for our B2C segment increased by 64% compared to the third quarter of 2019. On average, more than a million monthly unique paying customers engaged with DraftKings each month during the third quarter. This improvement reflected continued growth of our core DFS product spurred by on-going product innovation, strong engagement from existing Sportsbook and iGaming players, and expansion of our player base in several new states.
- Average Revenue Per Monthly Unique Payer (“ARPMUP”) for our B2C segment was $34 due to limited sports activity in July and atypical hold rates from NFL wagering through the third week of the season, which was partially offset by increased engagement with our iGaming product offering.
- GAAP sales and marketing expense increased to $203 million in the three months ended September 30, 2020. The increase over the third quarter of 2019 was primarily due to being live in seven more states, including Illinois, for Week 1 of the NFL season this year versus Week 1 of 2019. DraftKings experienced strong returns on its marketing spend due in part to pent-up demand, the unique sports calendar, and the stay-at-home nature of the COVID-19 pandemic.
DraftKings announced several advantageous commercial and strategic agreements in the quarter that are expected to provide the Company with access to unique and valuable content, intellectual property and marketing assets, including:
- an expansion of a multi-year content and marketing relationship with the PGA TOUR to become the first Official Betting Operator of the PGA TOUR.
- an exclusive multi-year extension to remain the Official Daily Fantasy Sports Partner of Major League Baseball.
- an exclusive multi-year deal with the Chicago Cubs, making DraftKings the Official Sports Betting Operator and Official Daily Fantasy Partner of the Cubs, including a plan to pursue a first-of-its-kind sportsbook at Wrigley Field.
- a multi-year agreement with ESPN to collaborate in a variety of areas including becoming a co-exclusive sportsbook link-out provider and exclusive daily fantasy sports link-out provider.
- an exclusive, multi-year agreement with the New York Giants, making DraftKings the official sports betting, gaming & casino and daily fantasy partner of the team.
- an agreement with the Colorado Rockies to be named both the franchise’s Official Daily Sports Partner and the franchise’s first Official Sports Betting Partner.
DraftKings management commentary 3rd quarter 2020 earnings report
BOSTON, Nov. 13, 2020 (GLOBE NEWSWIRE) -- DraftKings Inc. (Nasdaq: DKNG) (“DraftKings” or the “Company”) today reported its financial results for the third quarter of 2020. For the three months ended September 30, 2020, DraftKings reported revenue of $133 million, an increase of 98% compared to $67 million during the same period in 2019. After giving pro forma effect to the business combination with SBTech (Global) Limited and Diamond Eagle Acquisition Corp., as if it had occurred on January 1, 2019, revenue grew 42% compared to the three months ended September 30, 2019.
“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,” said Jason Robins, DraftKings’ co-founder, CEO and Chairman of the Board. “In addition to our year-over-year pro forma revenue growth of 42%, DraftKings recorded an increase in monthly unique payers of 64% to over 1 million, demonstrating the effectiveness of our data-driven sales and marketing approach. Our product offerings and scalable platform provide a distinctive and personalized experience for customers across the ten states where we operate mobile sports betting today, and we look forward to entering additional jurisdictions at the earliest opportunity.”
“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,” said Jason Robins, DraftKings’ co-founder, CEO and Chairman of the Board. “In addition to our year-over-year pro forma revenue growth of 42%, DraftKings recorded an increase in monthly unique payers of 64% to over 1 million, demonstrating the effectiveness of our data-driven sales and marketing approach. Our product offerings and scalable platform provide a distinctive and personalized experience for customers across the ten states where we operate mobile sports betting today, and we look forward to entering additional jurisdictions at the earliest opportunity.”
Increasing 2020 Revenue Guidance and Introducing 2021 Revenue Guidance
- DraftKings is raising its fiscal year 2020 pro forma revenue guidance from a range of $500 to $540 million to a range of $540 to $560 million, which equates to year-over-year pro forma revenue growth of 25% to 30% in 2020, despite COVID-19’s impact on the major sports calendar. This guidance assumes that all announced sports calendars are maintained through the end of the year and that we continue to operate in states in which we are live today.
- DraftKings is also introducing 2021 revenue guidance of $750 million to $850 million, which equates to 45% year-over-year growth based on the mid-points of the Company’s 2020 pro forma revenue guidance range and the Company’s 2021 revenue guidance range. This range is based on the same assumptions used for the Company’s 2020 guidance, in particular that all professional and college sports calendars that have been announced come to fruition, including the commencement of their 2020 to 2021 seasons, and that we continue to operate in states in which we are live today.
- Detailed financial data and other information is available in DraftKings’ Quarterly Report on Form 10-Q, being filed today with the Securities and Exchange Commission, as well as in a slide presentation that can be accessed through the “Investors” section of the Company’s website at investors.draftkings.com.
DraftKings (DKNG) stock price chart since its listing
The image below shows the stock price history of DraftKings (DKNG) over the last 5 years. And its been a very good time for DraftKings stockholders with the stock increasing sharply by 451.6% over the last 5 years.
The stock of DraftKings is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of DraftKings stock is positive at this point in time.
The stock of DraftKings is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of DraftKings stock is positive at this point in time.
Latest stock valuation of DraftKings (DKNG)
So what is DraftKings stock worth based on their 3rd quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for DraftKings at $32.30 a stock.
We therefore believe the stock of DraftKings is overvalued at its current price of $54.06
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $32.200, thus a good entry point into DraftKings would be at $29.10 or below.
We expect the stock of DraftKings to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued right now
We therefore believe the stock of DraftKings is overvalued at its current price of $54.06
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $32.200, thus a good entry point into DraftKings would be at $29.10 or below.
We expect the stock of DraftKings to pull back from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is overvalued right now
Next earnings release of DraftKings
It is expected that DraftKings will release their 4th quarter 2020 earnings report on 26 February 2021
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