DraftKings Earnings Preview
DraftKings has not seen negative impact from Covid-19 and the pandemic may even helped to boost its numbers, as users could spend more time on its platform due to reduced entertainment options.
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Valdas S. London based head of technology during the day, writer at night. Valdas writes about finance, economy, and technology.
2020-08-12 11:15

Since it became a publicly traded company in April 2020, Boston based DraftKings Inc. (NASDAQ: DKNG) saw its shares tripling from $11.77 to $32.04 on 11 August 2020.

Over the last few years, the company has gradually been adding more offerings to its portfolio by reaching deals with major organizations within or related to the sports industry, including Fox Sports, National Hockey League, multiple NBA, and NHL teams. In addition to its ability to sign up major sports brands, the company has also been seeing a steady growth of its user base. Number of monthly unique players grew from 619,000 (first 3 months 2019) to 720,000 (first 3 months 2020). Average revenue per monthly unique customer increased by 10.8% ($37 to $41). 

DraftKings has not seen negative impact from Covid-19 and the pandemic may even helped to boost its numbers, as users could spend more time on its platform due to reduced entertainment options. The company has gone into red in Q1 2020, however this was expected, as it is ramping up its sales and marketing capabilities (£53.7M in Q1 2020 vs $36.8M in Q1 2019). With major sports leagues already being reopened or planning to do so very soon, the company can expect even higher growth of its customer base and potentially a slight increase in spend per customer. 

Fantasy sports provider’s growth can slow down or even plateau if we will see the Covid-19 pandemic becoming more severe during autumn/winter seasons, as this can result in shutting down major sports leagues. One of the biggest medium/long-term opportunities will come from the individual states loosening their gambling restrictions, which would give a great boost to its betting side of the business. Currently, at least 20 states considering active mobile legislation. The creative minds behind its technology also got a lot of this right: according to the company, its customers spend more time per active session compared to the competitors, which may translate in higher user satisfaction and increased spend per customer.

The company has had a patchy path, including settlements for false advertisement. It is positive news for the potential investors, as having a listed company’s status, it will have to take existing legislation and regulations much more seriously. 

DraftKings Inc. is a keeper. 2020 is the perfect timing for the company. Solid strategy execution, well-crafted technological solutions, market leader position, and changing legislative landscape are the catalysts that will propel the company into even brighter future. It is important to mention that the company sees itself as a global provider with global ambitions. In the upcoming years, we may see more partnerships and developments outside the U.S., with some markets having unparallel potential for user base growth. We can expect its stock price to increase by 20-30% over the next two quarters. Investors should also keep an eye on state level gambling related legislation changes, as these can have short term spikes in its share prices.


Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Published On
2020-08-12 11:15

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About the Author
Valdas S. London based head of technology during the day, writer at night. Valdas writes about finance, economy, and technology.



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