DraftKings shares fell as much as 17% in pre-market trading after the company reported mixed fourth quarter numbers, including an indication that heavy losses will continue as it fights to secure market share in a relatively new industry.
It’s deja vu of sorts for DraftKings—the company reported revenue that beat estimates and raised its revenue guidance for next year, but the market for all sports betting stocks is volatile, and investors continue to be wary of the heavy losses incurred in customer acquisition. DraftKings stock closed Thursday at $22.06, down more than 70% from its high in the past 12 months ($74.38).
The detail that likely spooked the market, according to analysts, is the DraftKings EBITDA guidance. The company is projecting 2022 losses of $825 million to $925 million. In the quarter, the company reported $278 million in sales and marketing expenses, and losses per share of $0.35.
On the positive side, DraftKings reported fourth quarter revenue of $473 million, beating consensus estimates in the $445 million range. The company also raised the midpoint of its 2022 full year revenue guidance to $1.85 billion to $2 billion, up from $1.7 billion to $1.9 billion.
DraftKings also provided more information on the company’s gradual move towards profitability. In all of its current markets, Draftkings expects to be “contribution positive” by the end of 2022—that means gross profit minus external marketing, a figure that doesn’t fully address the underlying concerns of the market.
The company also said it expects to generate positive adjusted EBITDA in the fourth quarter of 2023. Full profitability will almost certainly take longer. Robins has said previously that DraftKings expects each new state to be profitable in about three years, and there are still a number of big states likely to launch sports betting in the coming months and years.
DraftKings continues to dramatically scale its business year-over-year, but those numbers can be misleading because of how quickly its addressable market changes depending on the legislative schedule of individual states.