Strong Bettor Performance Expected to Boost DraftKings’ Q4 Earnings

DraftKings, which currently holds a leading position in the expanding sports betting sector in the US, is gearing up to release its fourth quarter results in mid-February. These results will shed light on the company’s performance during the last months of 2023. However, ahead of the Q4 results, a prominent equity research analyst has raised the alarm about a potential anomaly that could impact DraftKings’ revenue for the quarter.

Mike Hickey, an analyst for Benchmark, reiterated a Buy rating for DraftKings with a price target of $41.00 as of Friday, while the company’s shares closed at $32.88 on Thursday. Hickey pointed out that the strong performance of sports bettors across the US may have an impact on DraftKings’ Q4 results, specifically noting that the company’s hold percentage for November may be affected by 1.5%. If this prediction holds true, it could potentially lead to a $35 million EBITDA loss and a $50 million revenue loss for the bookmaker, according to Hickey’s estimates.

Despite the potential anomaly in November, Hickey also predicted that the hold is likely to normalize in December. These predictions are based on DraftKings’ guidance, which estimated a revenue of approximately $3.7 billion and an EBITDA loss of $105 million for 2023. However, the company’s results are yet to confirm or reject the impact of the dip in the hold percentage.

In addition to its financial performance, DraftKings has been actively expanding its market access agreements, particularly in North Carolina. The company recently secured a collaboration with NASCAR, allowing it to grow its footprint in North Carolina ahead of the state’s planned launch of the online sports betting market before March Madness. Once the mobile sports betting market is launched in North Carolina, it will mark the 27th state where DraftKings offers its sportsbook.

Meanwhile, DraftKings faces stiff competition from rivals such as FanDuel, BetMGM, ESPN Bet, and Caesars in the increasingly competitive sports betting market across the US. In December, both DraftKings and FanDuel posted record-high betting handles and revenue, with FanDuel leading the way with a betting handle of $834.5 million, followed closely by DraftKings with a $773.4 million betting handle, according to data from the gambling regulator in New York.