DraftKings Q3 Earnings Preview: Analyst Estimates, Key Items To Watch, NFL Impact, What's Next

Walt Disney Company -0.03% Post
DRAFTKINGS INC +0.22% Post
FLUTTER ENTERTAINMENT PLC UNSPON ADS EACH REP 0.5 ORD SHS 0.00%
Penn National Gaming, Inc. -4.65% Post

Walt Disney Company

DIS

107.64

107.61

-0.03%

-0.03% Post

DRAFTKINGS INC

DKNG

40.84

40.76

+0.22%

-0.20% Post

Penn National Gaming, Inc.

PENN

16.61

16.65

-4.65%

+0.24% Post

FLUTTER ENTERTAINMENT PLC UNSPON ADS EACH REP 0.5 ORD SHS

PDYPY

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Sports betting company DraftKings Inc (NASDAQ:DKNG) will report third-quarter financial results after market close Thursday, Nov. 2.

Here's a look at the key earnings estimates and what analysts were saying ahead of the report, along with several key items for investors to watch.

Earnings Estimates: Analysts expected DraftKings to report third-quarter revenue of $685.21 million, according to data from Benzinga Pro.

The company reported revenue of $501.94 million in the last third quarter. DraftKings had beaten revenue estimates from analysts in seven straight quarters.

Analysts estimate DraftKings would report a loss of 70 cents per share in the third quarter. The company posted a loss of $1.00 in the third quarter of last year. DraftKings posted a profit of 14 cents per share in the second quarter. The company had beaten analysts’ estimates for earnings per share in the past six straight quarters.

After its second quarter, DraftKings raised its full fiscal year revenue guidance to a range of $3.46 billion to $3.54 billion.

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What Analysts are Saying: A path to profitability for DraftKings was a key focus for Morgan Stanley analyst Stephen Grambling.

The analyst, who had an Overweight rating and a $36 price target, said outside of the third quarter financial results, the key date was Nov. 14, when DraftKings hosts its analyst day.

"We expect management to introduce medium-term targets on revenue/EBITDA based on existing states, update state cohort ramp trends, and provide a walk to gross margins," Grambling said.

The analyst said DraftKings should have a "greater line of sight" on its top and bottom lines and more state legalizations.

"As a result, we expect a focus on the 22025/2026 periods, likely incorporating some characteristic conservatism."

The analyst said DraftKings shares being weak ahead of the third quarter results was likely more from technicals and the broader market than the expected earnings.

"We anticipate a 3Q beat followed by an ‘underwritable' analyst day target in the intermediate term to be enough to drive shares back up off the 200-day moving average."

A third-quarter beat and strong 2024 guidance for DraftKings was expected this week for Bank of America analyst Shaun C. Kelley.

The analyst, who had a Buy rating and price target of $38, said DraftKings could meet a potential high bar for third-quarter expectations.

"We believe investor expectations are elevated given DraftKings market share gains in 3Q," Kelley said. "We think DraftKings will beat Q3 expectations as they steadily gain market share."

The analyst said the third-quarter results could be driven by market share gains, strength in online sports betting and hold rates.

"We estimate Q3 OSB market share of 35% vs. 31.6% in Q2 and vs. our prior Q3 model's 29%."

The analyst expected DraftKings to share 2024 guidance with its third-quarter results with an expected target of $4.5 billion in revenue and $300 million in EBITDA.

NFL weekly data and app store rankings were shared by Needham analyst Bernie McTernan each week.

The analyst, who has a Buy rating and $44 price target, said week 8 NFL results were mixed with favorites winning at a high rate on the moneyline, but underdogs winning more against the spread. Overs also cashed at a higher rate, breaking a trend of the unders in the 2023 NFL season.

Promotional activity for sportsbooks was tracked by McTernan and the competitive offers from rivals could be impactful on DraftKings.

"In customer promotions, FanDuel lowered its Bonus Bets to $150 from $200, but is now including 3 months of NBA League Pass. In addition, PointsBet changed its offer to a $2,000 deposit match, excluding NY, up from $1,000 in bonus bets," McTernan said.

Data from the analyst also showed FanDuel, a unit of Flutter Entertainment (OTC:PDYPY), was ranked ahead of DraftKings in the sports category of the iOS app rankings. Fanduel ranked fourth, compared to DraftKings at fifth, Betr at 10th and BetMGM at 11th. DraftKings was third and ahead of Fanduel in week 7 of the NFL season.

Key Items to Watch: One of the big items to watch will be the level of guidance and forward-looking comments provided during the third quarter earnings release, given the date of the company's analyst day following closely behind.

Analysts and investors eagerly await 2024 and future guidance estimates, but might have to wait until the company's analyst day.

Another key item to watch was the impact of the 2023 NFL season. Viewership for the 2023 NFL season is up and the sport remains one of the keys for domestic sports betting companies.

Prior to the start of the 2023 NFL season, DraftKings CEO Jason Robins shared his optimism with Benzinga.

"It looks like it's shaping up to be a great NFL season," Robins told Benzinga in an exclusive interview. "It continues to be a great time of year. I'm expecting big things and big growth this NFL season."

The third-quarter results would include a small portion of the 2023 NFL season and commentary could indicate how strong the season is and the impact it could have on the fourth quarter.

As DraftKings gets closer to profitability, the key financial goal will likely be a big topic for the third quarter results and analyst day.

Another item that lingers on the minds of investors and analysts concerning DraftKings was the potential competition. The highly anticipated ESPN Bet is launching in November and comes with the backing of PENN Entertainment Inc (NASDAQ:PENN) through a licensing deal with Walt Disney Co(NYSE:DIS).

Given ESPN's large viewership and audience, the sportsbook could be popular at launch and attract new users and take market share away from existing platforms.

DKNG Price Action: DraftKings shares trade at $26.46 on Monday at publication versus a 52-week trading range of $10.69 to $34.49. Shares of DraftKings are up 140% year-to-date in 2023.

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