DraftKings Inc. (NASDAQ:DKNG) Is Expected To Breakeven In The Near Future

With the business potentially at an important milestone, we thought we'd take a closer look at DraftKings Inc.'s (NASDAQ:DKNG) future prospects. DraftKings Inc. operates as a digital sports entertainment and gaming company in the United States and internationally. The US$22b market-cap company posted a loss in its most recent financial year of US$802m and a latest trailing-twelve-month loss of US$417m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which DraftKings will turn a profit, with the big question being “when will the company breakeven?” In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for DraftKings

According to the 34 industry analysts covering DraftKings, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2024, before generating positive profits of US$283m in 2025. So, the company is predicted to breakeven just over a year from now. How fast will the company have to grow each year in order to reach the breakeven point by 2025? Working backwards from analyst estimates, it turns out that they expect the company to grow 67% year-on-year, on average, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for DraftKings given that this is a high-level summary, though, keep in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with DraftKings is its debt-to-equity ratio of 117%. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, and the company has considerably exceeded this. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of DraftKings to cover in one brief article, but the key fundamentals for the company can all be found in one place – DraftKings' company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

1. Valuation: What is DraftKings worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether DraftKings is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on DraftKings’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.