(Bloomberg) — DraftKings Inc. shares fell their most in almost two years after the company added fewer new customers in the fourth quarter and projected a wider loss this year than Wall Street had expected.
The company said Friday that an average of 2 million monthly unique paying customers engaged with DraftKings during the fourth quarter. Analysts were looking for 2.1 million monthly payers, according to estimates compiled by Bloomberg. The company also forecast an adjusted loss excluding some items in the range of $825 million to $925 million this year, steeper than analysts expected.
“In the present environment where tech investors have displayed zero tolerance for large losses, the 2022 Ebitda guidance is going to be a disappointment,” Vital Knowledge analyst Adam Crisafulli said.
Shares of the Boston-based company sank as much as 19% in New York, their biggest drop since March 2020. The stock had fallen 63% over the past year through Thursday’s close.
Sports betting has spread to an increasing number of U.S. states since the Supreme Court struck down a federal ban in 2018. That’s led to a free-for-all of introductory offers as DraftKings, FanDuel and others try to persuade people to use their phone to place wagers for the first time. DraftKings has entered the New York and Louisiana markets, and said Friday there are new potential opportunities in Maryland, Puerto Rico and Ohio.
Building relationships with new customers — and sports leagues — costs money. DraftKings spent nearly $1 billion on sales and marketing last year, almost double its allocation in 2020.
Chief Executive Officer Jason Robins is also trying to accelerate the company’s growth through acquisitions, including the purchase of Golden Nugget Online Gaming that is expected to close this quarter. Investors are eager to see what’s next after DraftKings walked away from a potential $22 billion deal with Entain Plc in October.
With mobile sports betting starting last month in New York and Louisiana, the company raised its revenue forecast for this year to a range of $1.85 billion to $2 billion. Analysts had estimated $1.9 billion, on average.
On an earnings call Friday, Robins said he expects DraftKings to be profitable by the fourth quarter of 2023. The company will continue to spend on advertising and promotions to lure new users as more states legalize sports betting, he said.
For more on DraftKings Fourth-Quarter Earnings, click here for our TOPLive blog.
(Updates shares in first and fourth paragraphs.)
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