DraftKings is More Than Just Sports Betting
While DraftKings gained prominence through its daily fantasy sports and sports betting offerings, the company is strategically expanding into other markets, primarily through acquisitions. In 2022, DraftKings acquired Golden Nugget Online Gaming to accelerate its entry into the iGaming sector, and this deal has proven successful. According to recent research by Eilers & Krejcik Gaming, DraftKings and Golden Nugget’s gaming apps ranked first and second overall, respectively.
Additionally, DraftKings made a move to penetrate the growing lottery industry by acquiring the digital lottery platform Jackpocket this year. The company anticipates that Jackpocket’s integration will contribute positively to EBITDA (earnings before interest, taxes, depreciation, and amortization) by 2025. By diversifying beyond sports betting, DraftKings can expand its customer base and reduce its dependence on any single market, thus mitigating risks. This strategy also allows for cross-selling various products and reducing customer acquisition costs, which fell 40% year-over-year in the second quarter.
A Clear Path to Profitability
While DraftKings has primarily focused on capturing market share, profitability has taken a backseat. However, recent trends suggest that the company could achieve profitability by 2025 under Generally Accepted Accounting Principles (GAAP). In the second quarter, DraftKings reported $1.1 billion in revenue, a 26% year-over-year increase. This successful quarter led management to raise its full-year revenue guidance from a range of $4.80 billion to $5.00 billion to a new target between $5.05 billion and $5.25 billion, reflecting an anticipated year-over-year growth of 38% to 43%.
Moreover, DraftKings expects its adjusted EBITDA to reach between $900 million and $1 billion in 2025, marking a significant milestone in the company’s history. In the first half of 2023, DraftKings recorded an operating loss of $459 million, but that figure improved dramatically to just $171 million in the same period a year later, indicating a notable turnaround.
Expanding into Untapped Markets
When the U.S. Supreme Court first ruled that states had the right to regulate sports betting independently, only a handful of states had legalized the practice in some form. Fast forward six years, and that number has grown to over 38 states, including Washington, D.C.
DraftKings is well-positioned to grow through two primary avenues: attracting new customers in markets where it already operates and entering new states that will legalize sports betting in the future. While there is no set timeline for when these holdout states might join the majority, the potential tax revenue generated from legalized sports betting is too lucrative to ignore. Since June 2018, states have collected over $6.3 billion in tax revenue from sports betting.
With strong positioning for both opportunities, DraftKings remains a top platform and stock within the sports betting landscape, promising a bright future as the industry continues to evolve.
