Markets bid up shares of DraftKings (DKNG) shortly after it posted quarterly results. The market’s sell-off
ended the brief rally. The online sports betting giant is the best pick in the sector. It is not necessarily the
best investment today.
DraftKings posted revenue growing by 33.7% to $417 million. Monthly unique payers grew to 2 million,
up by 29% Y/Y. Business momentum is so favorable that DraftKings raised its 2022 revenue guidance. It
expects revenue in the range of $1.925 billion to $2.025 billion, up by between 49% to 56%.
DraftKings expects to lose $760 million to $840 million.
Markets expected poor results. The company has new markets about to go live. This includes California,
Kansas, Missouri, Maine, Maryland, and Ohio. The firm may leverage its growth momentum through
economies of scale.
Risk
DraftKings does not have a path to profitability. Its cash burn is a concern. Markets are in a bearish
phase and will not entertain unproven business models.
Investors may speculate on DKNG stock in the teens. The gamble becomes a worthwhile investment
when the industry consolidates. Casinos entering this space may acquire firms. Others may exit this
sector. Either development would benefit DraftKings.
Consider a small, starting position in DKNG shares. The stock lost around 80% of its value from its peak.
Risks remain it may not move up from here.
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