DraftKings Earnings—Can the Boom in Sports Betting Help the Stock Recover

DraftKings Earnings—Can the Boom in Sports Betting Help the Stock Recover

• DraftKings is scheduled to report quarterly earnings after the market closes on Thursday.
• Analysts expect the company to announce earnings-per-share of $0.12 on $1.43 billion in revenue.
• It is continuing to benefit from expanded legalization of sports betting in the United States.
• Executives hinted at potential international operations in the last earnings call.

DraftKings (DKNG) will report quarterly earnings after the market closes on Thursday, and the stock market is expecting a volatile result. Although the company posted great earnings-per-share (EPS) figures the past few quarters, the stock is trading near 2025 lows. After the last earnings call, the stock price reached a high of $53.61, but that was followed by six straight bearish days in the market. DraftKings' stock price currently sits at $33 per share, just off the low of $29.64 realized in April.

When DraftKings first took off, we had a feeling it was going to be the next big thing for sports fans around the country. It's now embedded in most TV broadcast advertising efforts, and many NBA and NFL analysts even tell you their picks or spread bets during pre-game coverage.

DraftKings CEO Jason Robins, had a lot to say about the future in the latest letter to shareholders: “Our business is demonstrating the strong operating leverage that we predicted. While revenue grew 30%, our adjusted operating expenses increased only modestly year-over-year in fiscal year 2024 when normalizing for costs related to our acquisitions. We expect this to continue, driven by gains in both customer growth and revenue per customer growth, while our expenses approach scale as we continue to exert discipline and leverage new technologies across the organization.”

He went on to say that “even more exciting is the path we have in front of us. I believe the three most valuable assets in a growing digital market are a platform, a brand, and a large and loyal customer base. DraftKings is well-positioned along all three of these dimensions. Combining these valuable assets with strong execution, which we have proven out over the last 13 years, is why I am betting we’ll increase our advantage going forward.”

And Robins had more to convey: “There are also many potential vectors that could even further accelerate our growth. Our structural sportsbook hold percentage is continuing to increase, and the long-term ceiling could prove higher than we expect. Additional online gaming legalization in the U.S. appears inevitable and a matter of when, not if. We believe our newer verticals, such as digital lottery courier, are in their early stages of growth.”

DraftKings is at the epicenter of a megatrend, Robins said, noting that “real-money” online gaming is a large and growing industry with tailwinds behind it. In his view the company is well-positioned to capture significant market share, ad might eventually expand outside the U.S. and Canada.

It's interesting to see how DraftKings has quickly transformed itself from a sports betting and fantasy sports platform to much more general gambling, and that is likely to continue assuming there are no legal blockers that come up in the future.

DraftKings revenue increased 30% year-over-year in 2024, and the stock price did have a volatile range of over $20 per share from top to bottom. With that said, current implied volatility for the earnings announcement this week is about 10% of the notional value of the stock price. With a weekly expected range of +/- $3.33, this puts DKNG earnings in the higher end of the range for most stocks reporting earnings, as we generally see a 5%-10% stock price range for earnings announcements.

Looking to July, we see the market is only pricing in a +/- $5.61 stock price range for the next 73 days. That means this week's announcement has a huge implication on projected movement over the next few months, as the announcement accounts for over 50% of the implied range for July.

Bullish on DraftKings stock for earnings

If you're bullish on DKNG stock for earnings, you want to hear a lot of optimism on the upcoming football season and about recent success with growing revenue and signing up account. States continue to legalize sports betting, and more are opening the digital doors for online casinos. DraftKings already has a massive marketshare, and that will only grow as more ways to bet become legalized.

Bearish on DraftKings stock for earnings

If you're bearish on DKNG stock for earnings, you want to see EPS and revenue misses for the quarter. Any slowdown in growth could be troubling for the stock that's already been beaten down over the past few months. High implied volatility surrounding an earnings announcement speaks to the uncertainty of what will happen, which isn't always a good thing for stocks that are volatile to begin with.

Tune in to Options Trading Concepts Live at 11 a.m. CDT on Thursday for an in-depth look at options trading strategies ahead of the announcement.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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