DraftKings Analysts Unimpressed By Q3 Earnings, But Sports Betting Company's 2022 Guidance A Highlight

Sports betting pure play company DraftKings Inc DKNG reported third-quarter financial results on Friday. Analysts shared their takes on the company’s quarterly results and guidance.

The DraftKings Analysts: Bank of America analyst Shaun C. Kelley has a Neutral rating and $60 price target.

Needham analyst Bernie McTernan has a Buy rating and $73 price target.

Truist analyst Barry Jonas has a Hold rating and lowered the price target from $55 to $50.

Oppenheimer analyst Jed Kelly has an Outperform rating and lowered the price target from $80 to $70.

Related Link: Analyst Raises TAM For Online Sports Bettting, Highlights A Few Big Winners 

The DraftKings Analyst Takeaways: The third-quarter revenue reported by DraftKings of $213 million came in shy of many of the analysts' expectations and the Street target of $236 million. Guidance for the fourth quarter also disappointed several of the analysts covering DraftKings. 

“The Q4 revenue guide bump was lower than expected but was impacted by a weak hold in October, while the increase in Q4 losses is not demonstrating any real sign of operating leverage yet,” said BofA's Kelley. 

The fiscal 2022 revenue estimates of $1.7 billion to $1.9 billion from DraftKings were encouraging to Kelley, who had an estimate of $1.84 billion.

The guidance from DraftKings led McTernan to bump up estimated revenue of $1.9 billion for fiscal 2022.

“We are encouraged with the share gains DKNG achieved in September, coinciding with the cut over to its own product tech stack allowing for greater product innovation,” McTernan said.

DraftKings gained 200 basis points in market share in online sports betting and iGaming, a move that McTernan sees the technology stack integration helping.

“With the tech transition now over, DKNG can now focus on product innovation, which is showing signs of improving engagement with new users betting nearly 20% more on average in the fist three weeks of the NFL season relative to the prior year.”

Deeper than expected EBITDA losses and expanded costs associated with new state launches caused Jonas to lower his price target.

“While we think DKNG is likely a long-term winner, for now we favor stocks with wider valuation dislocations,” Jonas said.

Favorable tailwinds like product roll-outs, live-betting and iGaming are highlighted by Oppenheimer's Kelly, who kept an Outperform rating on DKNG.

“Expecting an aggressive CAC environment to continue, but DKNG’s marketing competencies make it best positioned, in our view,” Kelly said.

The analyst points to DraftKings’ user growth in September, which was ahead of rival FanDuel.

DKNG Price Action: DKNG shares were down 2.99% at $43.44 late Tuesday morning.