It hasn’t been this close in nearly 50 years.
Mystic Dan, an 18-1-underdog, rocked the horse racing world on Saturday, May 4, when the bay colt won the 150th running of the Kentucky Derby in the closet finish since 1947.
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The Run for the Roses is one of the biggest sporting events for gambling, right up there with the Super Bowl, March Madness, and the FIFA World Cup.
According to Churchill Downs, wagering from all sources on Derby Day set a new record of $320.5 million, beating last year’s record of $288.7 million. The Derby itself had a $210.7 million bet on the race, with $10 million coming from Japan.
But the ponies are hardly the only thing people are betting on.
Americans put down a record $119.84 billion on sports betting in 2023, up 27.5% from 2022, and boosted by new states coming online, according to the American Gaming Association’s Commercial Gaming Revenue Tracker.
Legal sportsbooks finished 2023 on a high note as the fourth quarter attracted wagers of $40.02 billion, S&P Global said in a February report, up 34.4% from the final period of 2022.
This included bets on NFL and college football, MLB’s post-season, and the starts of the new NBA and NHL seasons.
DraftKings (DKNG) is one of the biggest names in online sports betting, and the Boston-based company recently surprised Wall Street with its first-quarter results.
Betting is big business for DraftKings.
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CEO: customer experience ‘rapidly improving’
The sports betting platform posted an adjusted net loss of three cents per share, compared with a loss of 51 cents a year ago. This beat Wall Street’s call for a loss of 29 cents per share.
Revenue totaled $1.18 billion, up 53% year over year and exceeding analysts’ forecasts of $1.12 billion.
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The company also raised its guidance and now expects 2024 revenue between $4.8 billion and $5 billion, up from its earlier forecast of $4.65 billion to $4.90 billion.
Jason Robins, co-founder, and CEO, told analysts that the company continues to focus on driving product innovation and customer-centricity.
“Our platform and overall customer experience are rapidly improving,” he said during the company’s May 3 earnings call. “And as a result, we are achieving excellent customer retention and participation across sports and games.”
The company also continues to focus on driving operational efficiency across the organization, he added.
Robins also addressed the issue of responsible gaming, saying it’s “A topic that has always been very important to DraftKings.”
“Building products that our customers can enjoy responsibly is rooted in our DNA,” he said. “And we believe that we are at the forefront of responsible gaming initiatives, including technology, processes, industry affiliations, and internal leadership.
In March, DraftKings, Fan Duel and other U.S. sportsbooks said they launched a trade group, the Responsible Online Gaming Association, to develop and advance responsible gaming practices.
And last month, DraftKings announced that it had hired Lori Kalani, previously partner at the Cozen O’Connor law firm, as its first Chief Responsible Gaming Officer.
Several analysts responded to DraftKings’ results by adjusting their stock price targets.
Citi analyst Steven Sheeckutz raised the firm’s price target on DraftKings to $57 from $53, keeping a buy rating on the shares.
Management is exploring its capital allocation options and expects to provide an update next quarter, the analyst said, adding that he would not be surprised if the company ultimately authorizes a share repurchase program.
Analyst sees ‘very bullish’ takeaways from call
Sheeckutz said that he continues to believe DraftKings’ first-mover advantage, scale, and product innovation place it in a strong position to maintain its status as one of the leaders in the “rapidly growing” U.S. online betting market.
Stifel raised DraftKings’s price target to $51 from $50 and kept a buy rating on the shares. The firm was surprised to see shares trade off on Friday following the company’s first-quarter report.
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The firm continues to see “a constructive setup into the remainder of 2024” as underlying fundamentals remain healthy with runway left, the lottery app Jackpocket cross-sell should prove a material uplift, and DraftKings’ capital allocation update at the second quarter earnings may include an initial return of capital.
Needham raised the firm’s price target on DraftKings to $60 from $58 and kept a buy rating on the shares.
The firm said that DraftKing’s first-quarter results show strength in its execution on the topline and customer acquisition driven by its scale and technology advantages relative to smaller competitors.
Needham maintains its view that DraftKings is among the best secular profitable growth stories in its coverage.
TIG analyst Clark Lampen raised the firm’s price target on DraftKings to $55 from $53 and keeps a buy rating on the shares.
The analyst cited “very bullish” qualitative takeaways from the company’s conference call.
Robins noted that marketing efficiency is on par with the early stages of the sportsbook launch, Lampen said, while scale is driving natural promo leverage, engagement is improving, per cap spending is rising, and the industry still has substantial room for unit economic upside as it expands
Meanwhile, Argus lowered the firm’s price target on DraftKings to $48 from $54 while keeping a buy rating on the shares.
The firm’s analysts said they are positive on the company’s strong growth prospects and declining customer acquisition costs, narrowing its 2024 loss estimate to 10 cents per share from 14 cents per share and raising its 2025 estimate to 80 cents from 78 cents per share.
DraftKings is set to report its first profitable year in 2025, and once the company turns profitable, Argus sees its five-year earnings growth rate at 25%, the firm said.
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