DraftKings (NASDAQ:DKNG) stock is down 20% today after the sports betting company issued weaker-than-expected forward guidance along with its third-quarter earnings print.
Today’s selloff in DKNG stock is being prompted entirely by the Boston-based company’s 2023 outlook, which disappointed analysts and investors. In terms of earnings, DraftKings actually beat expectations across the board. The company announced that its loss narrowed on higher-than-expected revenues.
Prior to today, DKNG had declined 44% year-to-date (YTD) to $15.67 per share.
What’s Happening With DKNG Stock?
By all accounts, DraftKings issued strong Q3 results. The sports betting company announced a Q3 net loss of $450.5 million, or $1 per share. That came in 17% lower than the $545 million DraftKings lost in Q3 2021. This improved loss was due to revenues that surged 136% to $502 million in the third quarter, up from $213 million in the prior-year period.
DraftKings’ revenue in Q3 2022 trounced the $439 million that Wall Street had expected. Looking ahead, the company now forecasts full-year revenues of between $2.16 billion and $2.19 billion. That’s up from a previous forecast for between $2.08 billion and $2.18 billion.
That said, DraftKings also introduced a 2023 revenue forecast calling for between $2.8 billion to $3 billion in revenue. Analysts had been looking for $2.83 billion next year.
Why It Matters
This worse-than-expected outlook for 2023 earnings is overshadowing what was otherwise a stellar Q3 print. Investors are reacting extremely negatively to the prospect of slowing growth at the sports betting company. DraftKings has been spending aggressively to gain market share in both the U.S. and Canada as a growing number of jurisdictions legalize sports gambling.
This company has been growing so quickly in recent years that analysts and investors alike seem to have little patience for any signs of a slowdown. However, despite today’s sharp downturn in DKNG stock, shareholders should be encouraged by the big surge in the company’s revenue — and by the fact that DraftKings’ losses are narrowing.
What’s Next
It looks to be a difficult day for DKNG stock. But while many shareholders are dumping shares today, those who hang on may discover that the 2023 outlook is a case of DraftKings under-promising and over-delivering in the year to come.
On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
