Editor’s Note: This article was updated on March 1, 2022, to remove erroneous information about the operating cash flow.
DraftKings (NASDAQ:DKNG) is still blowing through large amounts of cash flow as seen in its latest quarterly results, released on Feb. 18. As a result, if this keeps up, DKNG stock could be in for a rough time over the next year.
This is after the stock has already cratered. It is well off its peak of $63.67 as of Sept. 9, trading at $21.83 on Feb. 24. This means it’s down over 64% for the past six months.
That is well more than a correction. It’s a disaster. In fact, even year-to-date (YTD) DKNG stock is down over 25% from $27.47 where it ended on Dec. 31.
Where Things Stand With DraftKings
The latest results show that the company’s revenue was much higher at $473 million for the quarter, up 47% year-over-year (YoY). Moreover, the company was quick to point out that this even exceeded guidance previously provided by 8%.
In addition, 2021 revenue grew 101% YoY after adjusting for acquisitions. This shows that the company is still on a roll in terms of customer acquisition.
However, DraftKings is still losing money and hemorrhaging cash. For example, its net loss for fourth quarter was $326 million, which was worse than last year at a negative $242.7 million. However, slightly better news than expected, this was better than the $545 million loss in Q3.
Even after adjusting for certain non-cash expenses, the adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was still deeply negative. For example, its adj. EBITDA for Q4 was -$128 million vs. -$87.9 million last year.
However, this performance in Q4 was significantly better than the negative $313.8 million adj. EBITDA in Q3. In other words, the company is not burning through as much cash.
What To Do
Even though analysts are still positive on DKNG stock, the average price targets have been dropping like a rock.
For example, Seeking Alpha shows that the average of 29 analysts is $37.68. However, this has been downgraded dramatically from $59.46 as of Jan. 7.
In other words, analysts are basically reassessing the situation as the stock has cratered. So far, despite the huge gains in revenue, the cost has not been worth it, in terms of the drop in DKNG stock. In this case, let the buyer beware.
On the date of publication, Mark Hake directly held a long position in VeChain crypto but not in any other of the securities mentioned in this article, either directly or indirectly. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.