DraftKings Hit by Q4 Losses, But Long-Term Growth Stays on Track

DraftKings, a big name in the US online sports betting and gaming scene, ran into some snags in the fourth quarter of 2024 because of unpredicted sports results. A January 2 note from JPMorgan analyst Joseph Greff pointed out that the company saw a big drop in revenue as betting favorites and multi-game parlays did well giving bettors an edge over the house.

DraftKings Cuts Q4 Estimates Amid Losses

Greff changed his revenue prognosis for DraftKings’ fourth quarter. He lowered it from $1.5 billion to just under $1.4 billion. He also cut his cash-flow forecast by $100 million bringing it down to $68 million. This change came after the company said it would miss its revenue target by $275 million and its cash flow target by $175 million in October. This happened because game results favored bettors.

Things looked up a bit in November. Betting companies kept 11.6% of the money bet, which is more than usual. But DraftKings did not do as well as other companies in December. It held onto 7% of bets, while the industry average was 7.2%.

Looking to the future, Greff stays positive about DraftKings’ chances to grow. He thinks the company will make $6.4 billion in 2025, which is 35% more than in 2024, and then $7.3 billion in 2026. He also expects cash flow to go up reaching $950 million in 2025 and $1.5 billion the next year. Greff believes these goals are within reach, given how DraftKings can use its size and edge over competitors in the US market to its advantage.

DraftKings’ Financial Stability Fuels Confidence in Growth Potential

The company’s solid cash position gives a boost to its future prospects. With $1.7 billion in the bank and $500 million more in available credit, DraftKings might buy back shares, although Greff does not expect this to happen soon. He kept an Overweight rating on the stock, with a $53 price target pointing to its promising growth chances and leading role in online sports betting. When he wrote his report, DraftKings shares were selling for $36.29.

Despite short-term ups and downs, Greff pointed out that the company’s core strengths remain solid. DraftKings is set to keep growing its slice of the sports betting and iGaming pie while cutting costs to boost profits and cash flow.

Other experts agree with this upbeat view, with BTIG sticking to its Buy rating and $55 price target. As DraftKings deals with the ups and downs of unpredictable sports results, its smart positioning and long-term growth plans make it a top player in the fast-changing gaming world.