DraftKings: EBITDA Margins on a Path for Strong Expansion Despite Intense Competition

We think the key takeaway from no-moat DraftKings’ investor day surrounded its aim for strong 2028 adjusted EBITDA margins of 30%, representing a large jump from the negative 3% we forecast for 2023. Investors should feel confident in meaningful long-term margin expansion, given already ramping profitability in older state vintages, which is aided by DraftKings’ in-house technology of innovative in-play and parlay action, leading to a hearty 33% combined online sports betting, or OSB, and iGaming, or IG, gross gaming revenue share. But we expect competition to elevate, led by no-moat Penn’s launch of ESPN Bet on Nov. 14. Overall, we plan to lift our 2028 adjusted EBITDA margin to around 28% from 23%, leading to a $2-$3 per share increase to our $32 fair value estimate.