DraftKings (DKNG) Misses Q4 Revenue Estimates, Yet Stock Soars

Company Highlights:

* Revenue: $1.39B (13.2% YoY growth; 0.9% miss)
* Adjusted EPS: $0.14 (Significant beat)
* Adjusted EBITDA: $89.45M (6.4% margin; 5% beat)
* 2025 Revenue Guidance: $6.45B (1.1% above estimates; 35.3% growth)
* 2025 EBITDA Guidance: $950M (In line with expectations)
* Monthly Unique Payers: 4.8M (1.3M YoY increase)
* Market Cap: $22.16B

Industry Overview:

* Gaming Solutions Industry: Dynamic and evolving, driven by digital transformation and innovation.
* Regulatory Compliance: Key challenge due to fragmented landscapes and changing regulations.
* Competition: Requires continuous investment in R&D to stay competitive and meet consumer demands.

Sales Growth:

* 61.7% compounded annual growth rate over the past five years.
* 45.9% annualized revenue growth over the past two years.
* Q4 revenue grew by 13.2% YoY, but missed estimates.
* Sell-side analysts project 34.2% revenue growth over the next 12 months.

Cash Flow:

* Low cash profitability in the past two years.
* Q4 free cash flow margin: 16.3% (10.6% increase YoY).
* Analysts predict improvement in cash conversion in the coming year.

Key Takeaways:

* Strong EPS and EBITDA beats in Q4.
* Slight increase in full-year revenue guidance.
* Stock rose 7.3% after earnings release.

Recommendation:

To determine if DraftKings is a good investment, consider the following factors:

* Long-term business quality
* Valuation
* Full research report available here (free to access)