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Why Shares of DraftKings Popped 16.2% on Friday

By Travis Hoium – May 15, 2020 at 2:37PM

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Even a huge loss didn't hold back the online gambling company today.

What happened 

Shares of online gambling company DraftKings (DKNG -3.95%) jumped as much as 16.2% in trading Friday after the company announced its first quarterly results as a public company

So what

First-quarter revenue was up 30% to $89 million, and was up 60% pre-COVID-19 at the "old DraftKings." As strong as that growth was, the net loss more than doubled to $68.7 million, or $0.18 per share, as the company invested in growing the business. 

Table with a mobile phone that has a sports betting app open.

Image source: Getty Images.

Management said that new products like esports, eNASCAR, and Korean baseball betting have offset some of the losses from the lack of live sports that COVID-19 has left behind. And it makes sense that betting will return to higher levels when sports resume in the next few months. 

Now what

It's tough to make a judgment on whether or not DraftKings' stock is a steal right now given the losses it is reporting. And its $10.2 billion market cap is higher than a lot of huge casino companies at the moment. But investors are pleased to see that the business has stabilized despite COVID-19 headwinds, and they see a lot of potential for growth as sports return. Despite today's pop, I'll take a cautious approach and stay out of this high-flying stock until I know more about what the bottom line is going to look like long term. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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DraftKings Inc. Stock Quote
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