Yahoo Finance DraftKings stock fell after earnings report, but CEO says 'nothing' suggests a slowdown
Shares of online betting platform DraftKings (DKNG) were down nearly 7% at market close on Friday after first-quarter financial results that reported a wider than expected loss and higher expenses as more parts of the U.S. legalize sports gambling.
But DraftKings CEO and co-founder Jason Robins struck an optimistic tone when speaking to Yahoo Finance Live on Friday, noting the company beat estimates on earnings per share and raised its full-year guidance by 16% amid increased enthusiasm for sports betting.
“We're seeing nothing in the data to suggest any slowdown,” Robins said. “In fact Q1 was as much continued momentum as we saw in the back half of last year. And really we see nothing to suggest that there's anything going on that would cause any sort of headwinds.”
To be sure, DraftKings reported some good news in its Q1 financial results. Monthly unique payers (MUP) spiked 114% compared to the first quarter of 2020. Average revenue per MUP jumped 48% since the same quarter last year.
Still, as the Wall Street Journal noted, sales and marketing expenses quadrupled year-over-year, leading to a loss of $139 million compared with $51.6 million a year prior.
The increased marketing costs come as more states in the U.S. legalize sports gambling. According to the American Gaming Association, 21 states plus Washington, DC. currently allow sports gambling; meanwhile, six states have legalized it and 14 others are considering laws to do so.
Explaining the growing popularity of sports betting, FanDuel President Amy Howe previously told Yahoo Finance Live that gambling had become a “mainstream part of live entertainment.” Robins, who operates one of FanDuel’s main competitors, is seeing the same shift in his business.
“Kind of gone are the days where passive consumption of content is the norm,” Robins said. “People want to interactively consume content whether that's playing games, the fantasy games or bets that DraftKings offer, whether that's tweeting or text messaging with your friends while you’re watching a sporting event...I think that's a trend that's going to continue.”
Sports fans might actually be more inclined to gamble on specific plays or smaller portions of the game than the game's overall result, Robins said. It feels more casual for bettors, he explained, and likely results from a gut feeling rather than pregame research.
DraftKings, along with FanDuel and Caesars Entertainment, will be an exclusive gaming partner of the NFL this season. As Robins pointed out, live bets keep people on the edge of their seats, something that’s beneficial for sports leagues’ television numbers as much as it helps companies like DraftKings.
It’s still early in the overall process, Robins noted, as more than half of U.S. states don’t have legalized online sports gambling. But Robins pointed out that at a recent investor day, DraftKings projected that if the other states do eventually legalize online wagers, the business’ market opportunity could surpass $60 billion.
“It’s obviously a tremendously big opportunity anyway you slice it and we are very early on in the development of it,” Robins said.
Read more:
FanDuel president: Sports betting is now 'a mainstream part of live entertainment'
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Josh Schafer is a producer for Yahoo Finance.
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