Based on the research data analyzed and published by Safe Betting Sites, The stock of online sports betting company DraftKings has recorded remarkable performance in 2020. This is in spite of the fact that major leagues such as the NHL, NBA and MLB have been on hiatus as a result of the coronavirus pandemic. As of September 1, 2020, shares had surged a remarkable 245% YTD.
During the second quarter of 2020, DraftKings reported $70.93 million in revenue, up from $57.39 million during Q2 2019 according to the company’s Q2 2020 earnings call. It completed Q2 with $1.2 billion in cash and had no debt on the balance sheet.
However, despite the increase in revenue, the betting company reported a Q2 loss of $161.4 million, translating to $0.55 per share. During the same quarter last year, the loss was much lower, which was at $28.11 million or 15 cents per share.
Its stock performance was worse than analysts expected as Dow Jones had estimated a 20 cents loss per share. On the other hand though, the revenue surpassed expectations as the Dow Jones forecast had placed it at $66.4 million.
DraftKings Revenue Grew 20% Year-on-Year in June 2020
With sporting events starting to resume, DraftKings’ revenue improved each month starting with a 20% YoY increase in June 2020 according to the Q2 2020 earnings call transcript. As a result, the first part of the third quarter has shown consistent year-on-year (YoY) revenue growth. The company says its pro-forma revenue expectations for 2020 range between $500 million to $540 million. This would be a growth rate of 22% to 37% for the second half of 2020.
Despite the impact of COVID on sports betting, the YTD pro-forma revenue grew 7% to $189 million according to the aforementioned Q2 earnings call. Part of the reason for its strong performance overall was the fact that it sought creative ways to engage its fans with new betting products. These included fantasy sports and betting opportunities for tennis, NASCAR, European soccer and golf betting among others.
Gamblers also had the opportunity to bet on Korean baseball, table tennis, video games and other unconventional events. With gamblers finding new things to place wagers on, the firm managed to make $88.5 million in sales during the first quarter. This was a 30% improvement compared to a similar period in 2019. Taking into account the operations of SBTech, the total sales for the period surpassed $113 million.
When regular sporting activities began resuming, the company reported increased engagement, resulting in increased revenue. According to the Q2 earnings call, the momentum that was seen in June accelerated in July and August with the return of the NHL, NBA and MLB.
Shares Shot up 67% in 1 Month Following NASDAQ Listing
DraftKings shares have been on a rampage since it merged with SBTech and Diamond Eagle Acquisition Corp. The latter was a blank check company founded with the objective of finding a company to acquire. Following the reverse merger, the daily fantasy titan started a new life as a sports betting firm.
Some of the big names with shares in the company include Walt Disney, George Soros and the Kraft family. Walt Disney is its third largest investor, holding a 6% stake, while George Soros, a hedge fund tycoon, holds 2.7 million shares, a $66 million stake through Quantum Partners. The Kraft family, famed for its ownership of the New England Patriots, holds 3.5 million shares.
After making its debut on NASDAQ on April 24, 2020, its shares shot up 67% in less than a month. By the start of June, it was valued at $13 billion, making it bigger than casino giants like Wynn Resorts and MGM Resorts. The second quarter report for 2020 was its first ever quarterly earnings report since the reverse merger.
A look at the hedge funds’ sentiment toward the stock at the end of the second quarter reveals interesting insights. At the end of June, the stock was included in at least 53 hedge fund portfolios according to Yahoo Finance. This marked a 51% improvement from a total of 35 hedge funds that had positions in the stock at the end of the first quarter.
Despite the seeming popularity of DraftKings’ shares, Morgan Stanley downgraded it from overweight to equal weight. Among the potential risks listed as the reasons behind the downgrade was investor euphoria. Other risks included a reversal of the stay-at-home trend as well as a potential cancellation of the NFL season.
Notably though, in spite of the downgrading, DraftKings stock was trading at $37.05 on September 2, 2020. This marked a monthly increase of 13.46% and a growth rate of 274.92% during the previous 12-month period.