DraftKings' stock goes south after sports-betting company swings to surprise loss

By Claudia Assis

DraftKings to buy online lottery app Jackpocket for $750 million in cash and stock

DraftKings Inc. shares dropped more than 3% in the extended session Thursday after the sports-betting platform surprised Wall Street with a quarterly loss and revenue that was merely in line with expectations.

DraftKings (DKNG) lost $45 million, or 10 cents a share, in the fourth quarter, compared with a loss of $243 million, or 53 cents a share, in the year-ago quarter.

Revenue rose 44% to $1.23 billion in the quarter, thanks to "continued healthy customer engagement, efficient acquisition of new customers," and an expansion into new markets, the company said.

Analysts polled by FactSet expected the company to report earnings of 8 cents a share on sales of $1.24 billion.

"DraftKings ended 2023 with excellent performance across customer acquisition, retention and engagement as well as structural sportsbook hold percentage despite the worst stretch of sport outcomes we have seen as a public company in the fourth quarter," co-founder and Chief Executive Jason Robins said in a statement.

The company raised its fiscal 2024 revenue guidance to between $4.65 billion and $4.90 billion, from a previously expected range of $4.50 billion to $4.80 billion announced in November.

The analysts surveyed by FactSet expect fiscal 2024 revenue of $4.7 billion. The updated guidance range would be equal to year-over-year growth of 27% to 34%.

DraftKings also raised its 2024 adjusted Ebitda outlook to between $410 million and $510 million, compared to a prior guidance of between $350 million and $450 million.

Separately, the company said it has agreed to buy lottery app Jackpocket for about $750 million in a cash and stock deal.

The proposed deal would "enable DraftKings to access and grow into the massive U.S. lottery industry, but more importantly strengthen its position" in Sportsbook, its online sports betting platform, and iGaming, its online gaming platform, "through higher customer lifetime value [and] an enhanced customer acquisition engine."

"This transaction will create significant value for DraftKings not only by giving our customers another differentiated product to enjoy but also by improving our overall marketing efficiency," CEO Robins said.

DraftKings said it expects the deal to drive between $260 million and $340 million in "incremental" revenue and $60 million to $100 million of incremental Adjusted Ebitda in fiscal year 2026.

DraftKings' stock ended the regular trading day up 1.3%. The stock has soared 150% in the past 12 months, compared with gains of around 21% for the S&P 500 index SPX.

-Claudia Assis

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02-15-24 2006ET

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