Less than a month after the daily fantasy sports (DFS) titan turned sportsbook / casino operator went public, DraftKings stock surges by nearly double its value.
Trading under the ticker symbol “DKNG” on the NASDAQ stock exchange, DraftKings went public on April 24 and closed its first day of trading up 11 percent to a price of $19.35 per share.
By the end of trading on May 18, DraftKings stock closed at $29.55 per share – providing investors with an encouraging start despite the global shutdown of sports due to the coronavirus crisis.
Investor confidence was buoyed on May 15, when the company’s first Q1 earnings call as a publicly traded company reported revenue of $88.5 million for a 30 percent quarter-on-quarter increase.
When assessed together with SBTech – the backend sportsbook technology provider DraftKings merged with before going public – the newly formed iGaming enterprise reported combined revenue of $113.4 million.
DraftKings Gets Creative to Cope with Coronavirus Cancellations
With much of the world’s sporting schedule on hold amidst the ongoing coronavirus outbreak, DraftKings has been forced to use creative solutions to keep bettors interested in the sports wagering world.
Among the replacement markets used since mid-March – when the NBA’s abrupt suspension of its regular season started a domino effect that eventually shuttered all major professional and collegiate leagues – are Madden NFL video game simulations of the upcoming 2020 schedule.
During the earnings call, DraftKings co-founder and chief executive officer Jason Robins referenced the immediate popularity of its new Madden NFL offerings:
“There is a group that just loves the NFL and can’t get enough of the NFL.
So, I think if you can find a way to give them that NFL experience more year-round, there’s something there.”
And in an interview with the Associated Press (AP), Robins expressed optimism that the return of live sports without actual attendance in stadiums or arenas will lead fans to explore at-home options like DraftKings:
“I hope and believe that sports will come back and people will continue to have a strong appetite for sports.
If there is a trend away from being outdoors and going to the public places, you could actually see an increase in sports viewership once traditional sports are being played again.
You could also see an increase in online activity.”
I hope and believe that sports will come back and people will continue to have a strong appetite for sports.
In addition to Madden NFL simulations, DraftKings Sportsbook has integrated obscure offerings such as tournament darts, NASCAR racing simulations, and Korean baseball to keep bettors satisfied.
DraftKings Stock Surges, But Lacks Immediate Profits
Though DraftKings Stock Surges, The Sportsbook / Casino Operator Lacks Immediate Profits
DraftKings isn’t quite profitable yet, as the earnings call revealed an individual Q1 net loss of $68.7 million and combined net losses with SBTech of $74 million.
And that won’t change anytime soon either, with Barron’s reporting that Morgan Stanley analyst Thomas Allen doesn’t project DraftKings achieving profitability until 2023. Allen predicts $1.4 billion in sales that year will finally get the rapidly expanding company over the proverbial hump.
In a client note titled “Who knew Fantasy Korean Baseball Was So Popular” which Allen wrote last week, the analyst predicted investors will eye DraftKings stock more as a tech play than traditional gaming industry stocks:
“We believe the market is going to rightfully value DraftKings more similar to high-growth internet stocks rather than EU online gaming stocks.”
DraftKings has successfully launched its online / mobile sportsbook platform in seven states – New Jersey, West Virginia, Indiana, Pennsylvania, New Hampshire, Iowa, and Colorado – and the company has plans to expand into nearly a dozen more in 2020 and beyond.