DraftKings tumbles after forecasting wider losses in 2022

DraftKings, the fantasy sports activities and betting group, forecast that losses would widen throughout 2022 because it elevated spending on gross sales and advertising within the extremely aggressive US market.

The group’s shares dropped 18 per cent in early New York buying and selling on Friday after the discharge of the earnings assertion, signalling doubts from traders over the success of DraftKings’ efforts to develop its market share.

The Boston-based firm forecast its adjusted loss, earlier than taking into consideration curiosity, taxes, depreciation and amortisation, for 2022 could be within the vary of $825mn to $925mn. Analysts polled by Refinitiv had estimated a lack of $550.1mn.

The outlook for deeper losses comes as DraftKings’ prices climbed. The corporate stepped up the quantity it spent on gross sales and advertising from $495mn in 2020 to $981.5mn in 2021.

“DraftKings is clearly performing effectively, however FanDuel is stronger in betting, BetMGM is stronger in gaming, and all different operators are decided to develop share,” stated Paul Leyland, an analyst at Regulus Companions.

“Outspending particular person rivals doesn’t appear to be transferring the general dial, making it a worse than nil-sum sport,” he added.

The US sports activities betting market has change into more and more heated as playing teams pour cash into attracting prospects with free bets and bonuses, specifically forward of final weekend’s Tremendous Bowl sport.

A number of executives and analysts have commented that the present stage of expenditure is unsustainable and that solely the largest firms will have the ability to survive the frenzy.

A few of DraftKings’ expenditure has gone into opening in states which have just lately legalised sports activities betting following a ruling by the US Supreme Court docket in 2018 that overturned a federal ban towards the follow.

In January, DraftKings launched cellular sports activities betting within the states of New York and Louisiana and now has operations in 17 states. It stated it may flip a revenue within the fourth quarter if it steps again from additional state launches this 12 months.

The most recent state figures for betting revenues over the Tremendous Bowl weekend present the keenness with which US punters have taken to betting on sports activities. In Nevada, $179.8mn was spent on wagers on the sport, up 32 per cent from 2021, whereas in New Jersey wagering elevated 22 per cent to $143.7mn.

DraftKings, which has additionally launched a platform for promoting non-fungible tokens, stated its gross sales within the fourth quarter of 2021 rose 47 per cent from the identical interval a 12 months earlier to $473mn, beating analysts’ estimates of $445mn.

Chief government Jason Robins stated the efficiency had “exceeded our expectations on the highest and backside line”.

DraftKings expects gross sales to extend between 43 and 54 per cent in 2022 to achieve between $1.85bn and $2bn, up from its earlier forecast of between $1.7bn and $1.9bn.