What Happened?
Shares of fantasy sports and betting company DraftKings (NASDAQ:DKNG) jumped 14.3% in the morning session after the company reported strong fourth-quarter results, which blew past analysts' EPS and EBITDA expectations. Looking ahead, it slightly lifted its full-year revenue guidance, beating analysts estimates', while EBITDA outlook for the same period was roughly in line.
On the other hand, revenue missed expectations by a whisker as average revenue per user dropped 16%, primarily due to lower spending from Jackpocket users and a lower sportsbook hold rate. This dynamic played into earnings, as GAAP operating margin fell. Overall, this was a decent quarter with key positives.
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What The Market Is Telling Us
DraftKings’s shares are quite volatile and have had 17 moves greater than 5% over the last year. But moves this big are rare even for DraftKings and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 9 months ago when the stock dropped 13% on the news that betting stocks took a hit after the Illinois State Senate passed a bill proposing higher taxes on online sports betting operations. The new proposal suggests taxes paid by betting operators will increase starting on July 1, 2024 with the rate varying from 20% to 40% depending on the company's annual revenue.
DraftKings is up 43.4% since the beginning of the year, and at $52.04 per share, has set a new 52-week high. Investors who bought $1,000 worth of DraftKings’s shares 5 years ago would now be looking at an investment worth $3,003.
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