DraftKings' (DKNG -2.25%) first-quarter earnings results released last week were better than expected, and they gave management the confidence to raise revenue targets for the rest of 2021. The outperformance can be partly attributed to an executive order by the Illinois governor extending the timeline to sign up for mobile sportsbooks online. Without the extension, new customers would have had to register in person and that inconvenience would likely have decreased the pace of signups.

Such an action ended up being a lucky break for DraftKings, but it wasn't the only factor leading to the excellent first quarter or the improved revenue outlook on the year.

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DraftKings is beating expectations 

Wall Street analysts were expecting DraftKings to report revenue of $231.53 million in the first quarter. Instead, DraftKings earned revenue of $312 million -- partly because of the executive order mentioned above and partly because it launched its product in Michigan and Virginia.

The extension of the executive order in Illinois lasted through April 3. Importantly, Illinois is the largest sports betting state. And having the opportunity to sign up new customers online instead of in-person potentially increases the pace of registration by tenfold. For instance, in Iowa, there was no mobile registration for the first 18 months of DraftKings being in operation. Then, in January 2021, mobile registration was allowed, and DraftKings signed up more new customers in five days than it did in all of the previous 12 months.

Moreover, DraftKings launched mobile sports betting and iGaming in Michigan and mobile sports betting in Virginia during the first quarter. Michigan generated $95 million in only its second month of operation, and at that pace would generate $1.1 billion in gross revenue annually. That would be more revenue than DraftKings was previously forecasting for the entire company in 2021.  

What this could mean for DraftKings' investors

Given the excellent outperformance in the first quarter, it's no surprise management raised guidance for the rest of 2021. Here's what CFO Jason Park had to say on the matter in the company's first-quarter conference call:

On our fourth-quarter earnings call in February, we provided a range for 2021 revenue of $900 million to $1 billion. Given our strong start to 2021 and underlying acquisition, retention, and monetization of players, we are increasing our guidance to $1.05 billion to $1.15 billion of revenue for 2021, which equates to year-over-year growth of 63% to 79%, and a 16% increase compared to the midpoint of our prior guidance. The 16% increase in the midpoint of our 2021 revenue guidance reflects strong performance in Q1, which has continued in Q2.

Still, even though DraftKings reported excellent results in the first quarter and raised expectations for the rest of the year, share prices of its stock are down more than 13% since the earnings report release. Further, share prices are down about 27% in the last month. It could be that the stock is caught up in the broader sell-off of profitless growth stocks.

DraftKings is trading at a forward price-to-sales ratio of 16, versus 24 just over a month ago. That suggests this could be an opportunity for long-term investors looking for a growth stock with excellent prospects to take a closer look.