Please ensure Javascript is enabled for purposes of website accessibility

DraftKings Q3 Earnings Preview: Did the NFL Fuel a Surge in Revenue?

By Parkev Tatevosian, CFA – Nov 3, 2021 at 6:33AM

Key Points

  • Analysts on Wall Street expect DraftKings to report revenue of $231 million.
  • The company has already raised its full-year revenue guidance twice this year.
  • DraftKings expects to see a positive impact from the NFL season this quarter.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The sports-gaming company will report third-quarter earnings results on Nov. 5.

DraftKings (DKNG 0.47%) offers daily fantasy sports, mobile sports betting, and iGaming. The company is benefiting from a wave of legalization across states in the U.S for the services it offers. 

DraftKings' third-quarter earnings report, scheduled for Friday, Nov. 5, should provide investors a glimpse into the company's revenue-generating potential. The current quarter's figures will include the benefits of the National Football League season, which is the most popular among sports bettors. 

A person sitting on a couch with his hand raised looks at a sports-betting page on TV.

Image source: Getty Images.

It could be a great NFL season for DraftKings

DraftKings' revenue is growing rapidly as the company expands into new states. In all, DraftKings is live with mobile sports betting in 14 states, iGaming in four states, and its most mature product, daily fantasy sports, is available in 43 states. States are increasingly finding these services to be a win-win scenario, and the districts get to increase the revenue without directly raising taxes on constituents within their borders. It also increases the state's gaming footprint without the gigantic land-based casinos.

In the most recent quarter, which ended June 30, revenue increased by 320% from the year-ago period. The remarkable outcome led to management raising revenue estimates for the rest of the year to a range of $1.21 billion to $1.29 billion. The midpoint of that range is a 14% increase from the previous guidance.

DraftKings has delivered excellent performance so far in the fiscal year 2021, and that's even before the NFL season has started. Listen to CEO Jason Robins talk about the importance of the sport to its business:

So based on what we're seeing today, I would expect we're going to get very good results going into NFL. NFL is basically like our holiday season. It's when we acquire the most new players and reactivate large portions of the player base.

Notably, the NFL season encompasses DraftKings' third and fourth fiscal quarters, with most results going into the fourth quarter. Therefore, if the company sees a significant impact on its business here in Q3, it may raise revenue targets for the rest of the year. 

Investor concerns are creating а bargain price for DraftKings stock

Analysts on Wall Street expect DraftKings to report revenue of $231 million and a loss per share of $1.07. The company keeps losing money as it expands into new territories and invests in growth. The market is willing to give DraftKings a pass on its losses so long as it makes solid progress in expanding to new states and acquiring new customers.

The stock is up 4.66% so far this year after falling tremendously when economies started reopening late in March. Investors fear that with land-based casinos reopening, people may choose to gamble there instead. Also, as economies reopen, people have more choices on entertaining themselves outside of their home, which could divert spending away from DraftKings. So far, that's not playing out, and DraftKings' revenue keeps exploding. 

The surging revenue, combined with modest stock price growth, means you can buy DraftKings at a price-to-sales ratio that is 31% lower than it was at the start of the year.

Parkev Tatevosian 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.