Looks as if 13 could be DraftKings' lucky number.
The sports-betting platform beat Wall Street's fourth-quarter-earnings forecasts, and Jason Robins, co-founder and chief executive, wasn't showing any signs of triskaidekaphobia — better known as fear of the number 13.
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"We just wrapped up our 13th year at DraftKings, and I am more confident than ever in our growth trajectory and ability to capitalize on the substantial opportunity ahead of us," Robins told analysts during the company's earnings call. "My confidence begins with the year we had in 2024."
The company, which maintains that "life’s more alive with skin in the game," acquired 3.5 million new customers at record-low customer-acquisition costs. And it increased its total customer base 42% year over year to 10.1 million, which is roughly the population of Bangkok.
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Chief Financial Officer Alan Ellingson said 2024 marked the first year in which DraftKings posted positive adjusted earnings before interest, taxes, depreciation and amortization.
"Additional online gaming legalization in the U.S. appears inevitable and more a question of when, not if, and our newer verticals, such as digital lottery courier, are only in their infancy," Robins said.
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CEO: DraftKings at epicenter of megatrend
Super Bowl LIX on Feb. 9, while not part of DraftKings’ fourth-quarter and full-year 2024 results, posted a sportsbook handle of $436 million, a company record for single-day activity
At least 25 states have legalized and regulated online gambling in some form, with most limiting their efforts to sports betting.
In addition, roughly 14 states have active online gaming legislation or are expected to consider the issue this year.
Last month a proposal authorizing interactive gambling — known as iGaming — advanced through the Indiana House Public Policy Committee on a 9-2 vote.
"DraftKings is at the epicenter of a megatrend," Robins said. "Real-money online gaming is a large and growing industry with secular tailwinds behind it."
"We believe we are well-positioned to capture significant share, and we haven't even begun to expand outside the U.S. and Canada which we could explore as a longer-term opportunity," he added.
Robins said one area of focus in 2025 is extending the company’s lead in live betting.
"Our recent acquisitions of Simplebet, Sports IQ Analytics and Mustard Golf provide us with proven technology and analytical tools that will accelerate our product roadmap and bring the live-betting experience to another level," he said.
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On Feb. 18 DraftKings said it launched a syndication for a proposed $500 million credit facility to be used for general purposes.
Fitch assigned DraftKings a BB-plus long-term issuer rating, its first time assessing the company, and it pegged the term loan at BBB-minus.
The credit rating provider said DraftKings' exposure to online gaming makes it vulnerable to variable trends, particularly in online sports betting.
"The OSB market is less stable than iGaming due to the unpredictability of sports-betting outcomes, influenced by various factors, causing high volatility," Fitch said.
"Increased scale and diversification in iGaming or global OSB can mitigate the impact of high-profile events like the Super Bowl on earnings."
The credit rater said DraftKings benefited from its leading market share in both iGaming and online sports betting. As the market leader, Fitch said, the company profits from its substantial user base and wide product offering, resulting in lower customer-acquisition costs.
Analyst expects DraftKings revenue to jump
DraftKings launched in 2012 as a daily sports fantasy service and moved into sports betting in 2018. The move came after the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act and allowed states outside Nevada to legalize sports betting. The company went public in 2020.
DraftKings' shares are up nearly 12% from a year ago and have climbed 34% this year.
Several investment firms issued research reports following the company's earnings report.
Needham raised its price target on DraftKings to $65 from $60 and affirmed a buy rating on the shares.
The investment firm noted that the stock's post-earnings rally was stronger than expected but likely speaks to the idea that before the report investors were skeptical that DraftKings could hit its 2025 guidance.
After the earnings report Needham is incrementally more bullish on the company hitting these targets. That's as trends in the handle from online sports betting accelerated in Q1 and sports outcomes are seen as "positive" in the quarter so far, the analyst tells investors in a research note.
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Argus analyst John Staszak raised the firm's price target on DraftKings to $60 from $50 and maintained a buy rating on the shares after its earnings beat estimates and raised its guidance.
Reflecting the legalization of online sports betting in additional states, the firm expects DraftKings revenue to jump 35% to $6.5 billion in 2025 from $4.8 billion in 2024, while its declining customer-acquisition costs bode well for long-term growth, Staszak said.
The analyst added that the company should see its first profitable year in 2025. He raised Argus's 2025 earnings-per-share view to $1.50 from 88 cents and said that once the company turns profitable, its five-year earnings growth rate forecast is 25%.
Piper Sandler raised the firm's price target on DraftKings to $60 from $48 while reiterating an overweight rating on the shares.
The firm said that unfavorable sports outcomes once again led to headwinds in the fourth quarter, but core trends remain favorable in its eyes. Management slightly raised its full-year 2025 revenue outlook and reiterated its Ebitda guidance, the investment firm said.
Unfavorable sports outcomes include cases in which an underdog team wins, resulting in payouts to many customers and the company losing money.
But DraftKings said the year was off to a strong start, with January coming in ahead of expectations and early February trends also showing positive momentum, the firm said.
Piper Sandler said it remained impressed that the company could continue to grow at such a high rate even as it reaches scale.
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