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Why DraftKings Stock Dropped 5.6% on Friday

By Travis Hoium – Updated May 7, 2021 at 2:37PM

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Even great results couldn't push the shares higher.

What happened 

Shares of online gambling company DraftKings (DKNG -3.46%) fell as much as 5.6% in trading on Friday after the company reported first-quarter 2021 results. At 2 p.m. EDT today, shares were still down 4.7% for the day. 

So what

Revenue jumped an incredible 253% to $312 million, although the net loss exploded from $68.7 million a year ago to $346.3 million in the first quarter. Management spent more on sales, marketing, general, and administrative costs than the revenue generated.

Sports betting app open on a smartphone.

Image source: Getty Images.

On an adjusted basis, which pulls out one-time items, the loss was $0.36 per share, which was better than the $0.44 loss that Wall Street expected. 

Another positive was management increasing full-year revenue guidance from between $900 million and $1 billion to a range of $1.05 billion to $1.15 billion. 

Now what

Investors knew top-line results were going to be good given the expansion of online gambling in the U.S., but that hasn't translated to better performance for this growth stock. What investors seem to be concerned about finally is the fact that DraftKings is getting nowhere near profitability despite its growth. And if that trend continues, it'll be tough to value the stock, especially as land-based casinos open and start to take market share back again. 

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
DraftKings Inc.
DKNG
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