DraftKings’ Q4 Results Could be Impacted by Lower November Hold

Posted on: January 5, 2024, 05:11h. 

Last updated on: January 5, 2024, 05:11h.

A November winning streak by US bettors may affect DraftKings’ fourth-quarter results, says Benchmark analyst Mike Hickey.

Employees at DraftKings headquarters. An analyst said the operator’s fourth-quarter results could be hampered by reduced hold in November. (Image: CNBC)

Hickey suggests that the hold rate decreased by 150 basis points as a result of the favorable odds in November. This may have an impact of $50 million on DraftKings’ fourth-quarter revenue and $35 million on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

He derived this assumption from DraftKings’ guidance predicting a 2023 EBITDA loss of $105 million on $3.695 billion in revenue. While the December data is pending, Hickey believes that the hold percentage in the last month of 2023 likely normalized and was likely an anomaly.

Hickey rates shares of the sportsbook operator “buy” with a $41 price target.

DraftKings 2024 Outlook Remains Strong

DraftKings will report the October through December results on Feb. 15 after the close of US markets, and is expected to beat forecasts for top and bottom line. The company forecasts a positive 2024 EBITDA of $350 million to $450 million on sales of $4.5 billion to $4.8 billion, making it profitable for most – if not all – of 2024.

In 2025, DraftKings expects to generate revenue in the mid-$5 billion range on adjusted EBITDA of $900 million. These numbers project a growing and maturing industry and the gaming company could see sales of $7.1 billion on EBITDA of $2.1 billion by 2028.

The stock more than tripled last year, and dropped 7.50% this week as investors booked profits.

Competition Comments Could Be Key

Despite the pressured hold percentage in November, investors are watching DraftKings’ ability to retain and grow market share in the sports wagering space. DraftKings, however, sees new competition as a sign of growth in the industry.

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