DraftKings (DKNG) earnings writeup
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Investment portfolio spreadsheet with all of my core holdings, non-core holdings, swing trades and hedges
Investment portfolio spreadsheet also contains real-time activity (buys, sells, adds, trims) plus real-time notes/commentary/charts throughout the day
My investment portfolio is up +224.4% in 2024, after being up +134.7% in 2023, now up more than 3,000% since January 2020 when I got back into investing full-time.
Here’s my investment strategy which focuses on high-quality growth stocks… I own 15-20 core holdings (great fundamentals, compelling valuation) plus another 5-10 non-core holdings (good fundamentals, reasonable valuation) plus another 5-10 swing trades (good fundamentals, reasonable valuation, compelling technicals).
As long as the fundamentals remain strong and valuation remains compelling/reasonable, then I’ll add on pullbacks.
I only want to own stocks that have at least 50% upside within the next 1-2 years and at least 100% upside within the next 3-4 years.
My objective is to maximize the upside in good markets and minimize the downside in bad markets. I accomplish this by being very selective with my stock picking and disciplined on valuations while using a variety of hedging strategies to protect my gains in market downturns.
Hosting my next webinar with TrendSpider on Monday, August 26th at 4:30pm EST: https://us06web.zoom.us/webinar/register/WN_CD5-LhCOQRePVsbOs_n-Ow#/registration
When I’m looking for the best swing trading setups, there are 7 specific setups that I’m focused on:
breakouts
consolidation / pre-breakouts
gap ups
retests after breakout
reclaim 50d
reclaim 200d
reclaim AVWAP from 52 week high
We’ll go through 5, 6 and 7 in this webinar. I’ll also talk about which stocks I’m focused on after earnings season and where we could see some big multiple expansion over then next few weeks.
Register at: https://us06web.zoom.us/webinar/register/WN_CD5-LhCOQRePVsbOs_n-Ow#/registration
DKNG Q2 earnings report: https://draftkings.gcs-web.com/news-releases/news-release-details/draftkings-reports-second-quarter-revenue-growth-26-1104-0
DKNG Q2 earnings webcast: https://edge.media-server.com/mmc/p/o3oz4gb4/
DKNG Q2 business update: https://draftkings.gcs-web.com/static-files/cfed2da7-719f-4b7a-9584-54882dc6de9b
DKNG Q2 earnings presentation: https://draftkings.gcs-web.com/static-files/489d2f1d-ebfd-4b79-9704-8066ea1a6378
Overview
Originally started as a daily fantasy sports (DFS) provider, DraftKings is now the only US-based vertically integrated sports betting operator powering sports (Sportsbook) and gaming (iGaming) entertainment.
For tens of millions of men and women, watching sports now goes hand in hand with sports betting. For some, placing bets on teams, players, scores or specific stats within the game has improved the sports experience, making it more exciting and entertaining than ever before.
Until May 2018, sports betting was banned in nearly every state (except Nevada, Oregon, Montana, and Delaware). New Jersey was the first state to file a case with the Supreme Court to overrule that ban and legalize online betting.
Ever since the ban on betting was struck down, this industry has seen massive growth, and so has DraftKings. The number of unique customers on its platform increased from 1.7 million in 2018 Q2 to 8.4 million in 2024 Q2, representing a 30.5% CAGR. Over the same period, DraftKings grew revenues from $226 million in CY2018 to $5.15 billion (the midpoint of the new guidance provided in 2024 Q2), representing a whopping 68% CAGR.
DraftKings remains in the “land grab” growth stage with aggressive promotions to win over the growing number of customers with every new state that legalizes online betting. As a result, it needs to spend heavily on marketing, which accounted for more than 50% of its revenue until recently. Over the past two years, the company has done a remarkable job of becoming more efficient, reducing customer acquisition costs, increasing the lifetime value of existing customers, improving margins, and finally becoming profitable for full year 2024 (based on non-GAAP net income estimates)
Following the launch of its Sportsbook in Washington, D.C. (in July 2024), DraftKings now operates in 25 states and Washington, D.C., which collectively represent approximately 49% of the US population. DraftKings is also live with iGaming in 5 states, representing approximately 11% of the US population, live with its Sportsbook and iGaming products in Ontario, Canada, representing approximately 40% of Canada’s population, and looking to launch its Sportsbook product in Puerto Rico.
While there are many competitors out there, including BetMGM and ESPN Bet, it seems like DraftKings and their biggest competitor FanDuel are creating a duopoly. DraftKings management continues to believe there’s still room to get more efficient and expand margins even more which means EBITDA and EPS growth should look very good over the next few years.
As of today, analysts are looking for DraftKings to grow revenues at a 20% CAGR from CY2024 through CY2027 however during the same time frame they’re looking for EBITDA to grow at a 75% CAGR and EPS to grow at an 80% CAGR. This is why I’m bullish on DraftKings, it’s not about this year, it’s about the next 3-4 years as the sports betting industry continue to grow.
However this does highlight one of the biggest risks to DraftKings — states raising the OSB (online sports betting) taxes which will likely come right out of their margins and profits because it will be hard to pass those higher taxes/costs onto customers as DraftKings learned over the past month [click here]
DraftKings continues to give bullish long term guidance which probably helped the stock from selling off after Q2 earnings along with the $1 billion stock buyback. DraftKings expects EBITDA of at least $900 million in CY2025 with a CY2028 target of $7.12 billion in revenue and $2.1 billion in EBITDA (based on currently operating states) which seems pretty achievable.