Stock Analysis

DraftKings Inc. (NASDAQ:DKNG) is Not Making Money Anytime Soon

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DraftKings Inc. (NASDAQ:DKNG) needs to convince investors that their business will become viable and create value in the foreseeable future. One way we use to estimate this is by looking at analyst expectations for a breakeven quarter in profitability. This is important as a company can burn a limited amount of cash before it has financial distress issues.

In the latest earnings report, DraftKings posted:

  • Quarterly loss per share of US$1.35 v.s. the expected US$0.98 loss per share
  • US$213m quarterly revenue v.s. the expected US$236m
  • The company is spending US$304m on sales & marketing

DraftKings Inc. operates as a digital sports entertainment and gaming company in the United States. The US$18b market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is DraftKings' path to profitability – when will it breakeven?

Below, we will provide a high-level summary of the industry analysts’ expectations for the company.

The previous consensus from 28 of the American Hospitality analysts is that DraftKings is far from breakeven. The company has difficulty outlining a viable path to profitability in the foreseeable future, which amplifies the risk-reward proposition for investors.

In the chart below, we will see the pre-earnings expectations for profitability of DraftKings. The trend suggests that the company might be unprofitable well into 2025. Management needs to outline expected catalysts and a realistic path to profitability.

NasdaqGS:DKNG Earnings Per Share Growth November 5th 2021

Offsetting this issue, is the current cash balance of the company at US$2.4b, which can allow it to operate at a loss for some two years - depending on the change is cash flows in the future.

One thing we would like to bring into light with DraftKings is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in DraftKings' case is 57%. Note that a higher debt obligation increases the risk in investing in the loss-making company.

Conclusion & Next Steps:

DraftKings is not expected to breakeven soon, and that gives us a good reason to make a deeper dive into the fundamentals, risk factors and business model before making any conclusions.

See our Fundamental Report for DraftKings

There are key fundamentals of DraftKings which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at DraftKings, take a look at DraftKings' company page on Simply Wall St. We've also compiled a list of important factors you should look at:

  1. 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.
  2. 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.

Valuation is complex, but we're helping make it simple.

Find out whether DraftKings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article 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.

Goran Damchevski

Goran Damchevski

Goran is an Equity Analyst and Writer at Simply Wall St over 4 years of experience in financial analysis and company research. Personally, Goran has over 4 years of experience in financial analysis and company research, where he previously worked in a seed-stage startup as a capital markets research analyst and product lead and developed a financial data platform for equity investors. 

About NasdaqGS:DKNG


DraftKings Inc. operates a digital sports entertainment and gaming company.

Adequate balance sheet with reasonable growth potential.