In a note to clients, Benchmark analyst Mike Hickey expressed concerns that DraftKings’ fourth-quarter results could be negatively impacted by a strong November for U.S. sports bettors. Hickey believes that the favorable results for bettors in November may have reduced DraftKings’ hold percentage by 150 basis points (1.5%), potentially weighing on the operator’s fourth-quarter revenue and adjusted earnings.

Based on DraftKings’ 2023 EBITDA loss guidance of $105 million on revenue of $3.695 billion, Hickey estimates that the reduced hold rate could result in a $50 million impact on revenue and a $35 million impact on adjusted EBITDA. He also mentioned that December data is not fully available, but he believes that DraftKings’ hold percentage likely normalized in the 9% range in December, indicating that November’s results may have been an anomaly.

Despite these concerns, Hickey maintains a “buy” rating for DraftKings shares, with a $41 price target, implying a potential 24% upside from the current closing price.

Looking ahead, DraftKings is scheduled to deliver its October through December results on Feb. 15 and is expected to provide an outlook for 2024. The company has forecast a positive 2024 EBITDA of $350 million to $450 million on sales of $4.5 billion to $4.8 billion, indicating potential profitability on an EBITDA basis throughout 2024.

For 2025, DraftKings expects revenue in the mid-$5 billion range and adjusted EBITDA of $900 million, with those figures growing to $6.2 billion and $1.4 billion respectively in the following year. By 2028, the company aims to achieve sales of $7.1 billion and EBITDA of $2.1 billion.

Analysts and investors will also be closely watching DraftKings’ ability to retain and grow market share in the face of new competition in the sports wagering space. Despite solid starts for new competitors such as ESPN Bet and Fanatics, incumbents like DraftKings and FanDuel have not yet felt significant pressure from new rivals. DraftKings has expressed a welcoming attitude towards new competition, seeing it as a positive sign for the industry’s growth and maturation.

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