Shares of DraftKings (NASDAQ:DKNG) jumped 12.3% in after-hours trading yesterday after the company posted solid beat-and-raise results for the second quarter of Fiscal 2023. DraftKings is a fantasy sports contest and sports betting company. The robust results were attributed to continued product innovation, customer acquisition and retention, and operational cost efficiency. The company’s ability to churn out a better-than-expected adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) figure in Q2 and the outlook for reporting positive adjusted EBITDA for Q4 pushed the shares higher.
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In Q2, DKNG’s Monthly Unique Payers (MUPs) grew 44% year-over-year to 2.1 million average MUPs. Plus, the Average Revenue per MUP (ARPMUP) rose 33% year-over-year to $137. These metrics improved remarkably in DraftKings’ Sportsbook and iGaming products.
Q2 Results in Detail
DraftKings posted adjusted earnings of $0.14 per share, while analysts had expected the company to post an adjusted loss of $0.25 per share. DKNG’s positive earnings come as a surprise after several consecutive quarters of losses. In the prior year period, DKNG posted an adjusted loss of $0.29 per share.
At the same time, DraftKings’ revenue of $875 million rose 88% compared to the prior year’s quarter and easily beat the consensus estimates of $764.55 million.
DraftKings’ Revised Outlook
Based on the solid quarterly performance, DKNG raised its full-year Fiscal 2023 revenue guidance. The company now expects revenue to fall in the range of $3.46 to $3.54 billion, up from its previous guide of $3.135 to $3.235 billion.
Moreover, DraftKings improved its FY23 adjusted EBITDA guide to fall between ($190) and ($220) million. In Q4, the company now forecasts generating positive adjusted EBITDA between $150 to $175 million and revenue of $1.2 billion.
The company is excited to launch its online sportsbook business in Kentucky, North Carolina, Vermont, and Puerto Rico by the end of this year. The launch in these new jurisdictions is subject to pending licensure and regulatory approvals.
Is DraftKings Stock a Good Buy?
Ahead of its Q2 print, Stifel Nicolaus analyst Jeffrey Stantial lifted the price target on DKNG stock to $32 (6.7% upside) from $25 while maintaining a Hold rating.
Stantial is optimistic about DraftKings’ “solid online sports betting market share during the NBA playoffs and MLB season.” Plus, the analyst is optimistic about its iCasino products and efforts to optimize marketing and promotional expenses.
Overall, DraftKings stock has a Moderate Buy consensus rating based on 19 Buys, six Holds, and two Sell ratings. On TipRanks, the average DraftKings price target of $31.77 implies 5.9% upside potential from current levels. Meanwhile, DKNG stock has exploded by 171.4% so far this year, thanks to posting consistent beat-and-raise results during the past three quarters.
