Should you buy DraftKings stock? (April 2024)

Published first at https://www.3minutebreakdowns.com DraftKings stock analysis. Ticker: $DKNG Sports betting business DraftKings is up 138% over the past year taking the company’s market cap to 23.2 billion dollars. But DraftKings financials don’t look particularly attractive. Revenue over the last 12 months grew 64% to 3.7 billion, but net income is negative 800 million and adjusted EBITDA is negative 151 million. Free cash flow is also in the red and the company reports almost 400 million in stock based compensation. However, in DraftKings' case, negative profits are not as bad as they seem. Following the legalization of sports betting in 2018, DraftKings has been in a race to take market share. The company spends money up front to acquire customers then drives substantial profits from those customers over time. So far it seems to be working. In 2019, the company generated revenue of $323 million. The figure last year was more than eleven times as high. And DraftKings appears to be cementing market share. According to this report, the two largest operators are Draftkings and FanDuel with over 60% of the market. Market share has allowed Draftkings to cut back on promotions in order to drive efficiency. Incredibly, while revenues grew 64% last year, sales and marketing cost increased by less than 2%. And management said customer acquisition costs dropped by almost a third. This operating leverage allowed DraftKings to report a huge 570 million swing in adjusted EBITDA. And so it’s not hard to see how DraftKings can quickly get to significant free cash flow. In fact, in the latest shareholder letter, management laid out its expectation for 1.4 billion in adjusted ebitda in 2026 and 2.1 billion by 2028. #stocks #investing #stockmarket #3mb