CZR - Sports betting rush: DraftKings and peers rally amid profitability focus and NFL season buzz

2023-08-04 08:09:53 ET

DraftKings ( NASDAQ: DKNG ) soared in early trading on Friday after the sports betting company's profitable quarter and strong guidance invigorated investors.

"We are acquiring new customers efficiently while simultaneously retaining and monetizing our existing players through rapid product innovation, less promotions, and higher hold from better bet mix," noted DraftKings Chief Financial Officer Jason Park on the quarter.

The timing is right for DraftKings ( DKNG ) to jump into the spotlight as the NFL and college football seasons are both starting in the next month. That is a point not lost on Wall Street analysts looking for the 2023 rally to extend after the strong earnings print.

Needham analyst Bernie McTernan: "DKNG beat the elevated expectations heading into the quarter with better than expected revenue and adj. EBITDA driving a positive revision to their '23E guide primarily driven by stronger customer retention and engagement. In addition, older state vintages continue to show strong unit economics with revenue growth and margin expansion resulting in growing contribution profit."

Jefferies analyst David Katz: "We believe the quarter supports our thesis in digital that operators are pivoting from investment spending to profits through product advancement and that this transition has more room to evolve. Thus, we expect a positive reaction in the shares."

B Riley Securities analyst David Bain thinks the strong earnings report from DKNG should fuel positive online gaming sentiment. The firm thinks Caesars Entertainment ( CZR ), Genius Sports ( GENI ), MGM Resorts ( MGM ), and Gambling.com Group ( GAMB ) could all benefit.

On Seeking Alpha, analyst Michael Wiggins De Oliveira said the prospects of positive EBITDA in 2024 and sustainable profitability from Q4 onwards add to the bullish sentiment on DKNG. "With a strong balance sheet and no debt, DraftKings is poised for a promising future with alluring free cash flows ahead," he noted.

Shares of DraftKings ( DKNG ) skyrocketed 12.02% in premarket trading. Flutter Entertainment ( OTCPK:PDYPY ) rose 2.45% in London trading and Gambling.com ( GAMB ) was up 3.05% premarket in the U.S., while MGM Resorts ( MGM ), Wynn Resorts ( WYNN ), Penn Entertainment ( PENN ), Sportradar Group ( SRAD ), and Caesars Entertainment ( CZR ) were all up by less than 1%. Meanwhile, Genius Sports ( GENI ) jumped 8.02% in the early session.

More on DraftKings:

• DraftKings: Overvalued And Profits Are Concerning
• DraftKings earnings highlights
• Relative strength index and moving averages
• Seeking Alpha's Quant Rating for DraftKings

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