DraftKings: Losing Patience As Customer Momentum Slows (Downgrade)

Gary Alexander
31.2K Followers
(10min)

Summary

  • DraftKings faces a tough rebound due to slowing customer growth and no major new state launches on the horizon.
  • Profitability has suffered from several quarters of unfavorable sports outcomes, leading to repeated guidance cuts.
  • The company is addressing weaker revenue from unfavorable outcomes by cutting promotional reinvestment, which may further threaten a slowing pace of new customer additions.
  • Despite recent corrections, DraftKings remains expensive, trading at over 21x EV/FY25 adjusted EBITDA, with no clear near-term growth catalysts. I'm downgrading the stock to a sell.

DraftKings Sports and Social in Nashville, TN.

Joe Hendrickson/iStock Editorial via Getty Images

Though the stock markets have nearly rebounded back to year-to-date highs, many stocks are still struggling to recoup their former peaks, with macroeconomic pressures exposing tough fundamental realities. Investors have to be careful to deploy prudent stock

This article was written by

31.2K Followers
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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