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SportsTranscript
00:00 (upbeat music)
00:02 - Sports betting has become legal
00:05 and DraftKings and FanDuel
00:07 and some of these other companies have become public.
00:09 We've heard about all of the money that they are losing,
00:12 right, like losing because they're spending on promos
00:15 and ads and everything else.
00:17 But if you're an investor in DraftKings this morning,
00:20 you're waking up feeling a lot better
00:21 than you did yesterday, aren't you?
00:24 - Yeah, you know, DraftKings is up almost 5% today
00:27 and it's not a surprise to see the stock doing well
00:30 after they reported earnings last week, right?
00:32 Look, DraftKings, like you said,
00:35 they're finally starting to turn a profit.
00:37 They made $151 million in EBITDA in the fourth quarter.
00:42 EBITDA is basically the cashflow your company is bringing in
00:45 before you consider the things you have to pay,
00:47 like taxes and interest and, you know,
00:51 all that kind of stuff.
00:52 So the interesting thing about this though
00:55 is they could have done even better
00:57 had the public not done so well
01:00 in those last two weeks of November.
01:03 They made $151 million in EBITDA,
01:06 but in those two weeks,
01:07 negative results swung $126 million of that EBITDA for them.
01:12 So they could have been closer to 300 million
01:15 had everything gone right in November as well.
01:18 And the big thing about DraftKings,
01:21 look, we have a story up about how Barclays upgraded them,
01:24 raised their target.
01:25 And it's kind of what you're seeing all across
01:28 the analysts at this point for DraftKings,
01:30 maybe a couple of holdouts here and there,
01:32 but DraftKings is simply doing everything
01:34 that you want it to do
01:36 from a shareholder perspective at this point.
01:39 I'm not even sure how many straight quarters
01:41 they've raised their adjusted EBITDA guidance.
01:44 I think it's four or five at this point,
01:46 but they raised the midpoint
01:47 for what they expect this year by 50 million,
01:50 just based off of what they've seen
01:51 in the first quarter alone.
01:52 And yes, that does include something
01:56 from this JackPocket company that they acquired
01:59 for $750 million in cash and stock,
02:02 but not all that much just yet.
02:04 So we're looking at a couple of things for DraftKings.
02:06 We're looking at, they're still getting more
02:09 out of the older states than I think they ever expected to.
02:12 And they're able to do that without having to promo
02:16 a whole lot and spend a whole lot on retention
02:20 for their customers.
02:20 So those are two really big things.
02:23 The other thing about DraftKings is
02:26 they're in iGaming too, Craig.
02:28 And at this point, it seems like that is a little discounted
02:32 when you're talking about the DraftKings stock.
02:35 They're getting all of this great momentum
02:37 out of the Sportsbook product,
02:38 but as iGaming continues to grow around the country
02:41 and now they have this JackPocket brand,
02:43 who they're not just a lottery company.
02:45 They also just launched an online casino in New Jersey.
02:49 Now they're gonna be able to do a bunch
02:50 of different things here.
02:51 And so I think you have to be feeling really good
02:53 if you're a DraftKings shareholder.
02:55 Hasn't been at this level since November of 2021,
02:58 then we're talking about almost two and a half years here.
03:00 So the industry as a whole, sports betting as a whole
03:05 is starting to hit that profitability point.
03:08 And so some of the raises, the stock guidance
03:12 that you're seeing here from the analysts,
03:14 some of that has to just do with, look,
03:16 the industry is doing well,
03:17 so maybe we have to attribute a little bit more,
03:19 give these guys higher multiples
03:21 on what we're figuring out the target price to be.
03:24 But a lot of it just comes back to good business
03:27 by DraftKings right now.
03:28 And then look, Jason Robbins still is saying
03:31 what investors wanna hear and not what players wanna hear.
03:35 They're talking about how great their hold is from Parlays.
03:38 They're talking about how much that is helping them
03:41 create a stronger base for the product.
03:45 We're not talking about luck or unlucky here
03:49 when they're having quarters where they're holding 9, 10, 11%.
03:53 We're talking about them actually building that
03:55 into their business model
03:56 by making their Parlay products stronger
03:59 and giving people more options, better options,
04:01 fun options to bet on as soon as they open that app
04:05 and they see it on the home screen.
04:06 So I think you have to feel really, really good
04:09 about where DraftKings is going right now.
04:11 And honestly, if you're invested in sports betting right now,
04:14 aside from maybe a couple,
04:15 I think you have to feel really good about the segment
04:18 and the way it's trending.
04:20 (upbeat music)
04:22 (upbeat music)