DraftKings suffers losses in the fourth quarter, as per J.P. Morgan analyst, while gamblers reap their wins
In a recent report, J.P. Morgan analyst Joseph Greff has made adjustments to his financial projections for DraftKings, the popular online sports betting and iGaming platform. The adjustments were made due to a string of unfavorable sports scores that saw favorites, multi-game parlays, and other heavily backed bets winning at a higher than normal rate.
Despite these challenges, Greff maintains a positive outlook for DraftKings, stating that the fourth-quarter adversity did not materially affect the company's outlook for 2025. The CEO of DraftKings, Jason Robins, is the one who reports on the company's positive and negative results.
Greff does not perceive excessive aggressiveness in DraftKings's longer-term financial forecasts extending into 2028. He deems the desired profit margins feasible. Greff reaffirms his Overweight rating on DraftKings, citing its "attractive revenue growth profile and ability to leverage its scale and strong competitive position in the U.S."
The saving grace of the fourth quarter, according to Greff, were operator-favorable outcomes in November, where operators kept 11.6 percent of handle, an above-average tally. At the time of his report, DraftKings stock was trading at $36.29 a share.
Greff trimmed his cash-flow projection for DraftKings's fourth quarter to $68 million. However, cash-flow projections for 2025 and 2026 remain at $950 million and $1.5 billion, respectively. Greff's forecasts for DraftKings's financial performance are based on his current assumptions and may change based on future developments.
Greff revised his fourth-quarter revenue estimate for DraftKings, bringing it down from $1.5 billion to just under $1.4 billion. For 2025, he forecasts revenue for DraftKings to be approximately $6.4 billion, followed by $7.3 billion in 2026, representing a 35% growth in 2025 and a 13% increase in 2026.
Greff's adjustments were modeled on October adversity experienced by DraftKings, where its management admitted a negative impact of $275 million in lost revenue and $175 million less cash flow, thanks to game results that were overwhelmingly favorable to bettors.
In October, DraftKings had held 7.2 percent of handle, while other sports betting providers kept 7.6 percent of handle. However, in December, DraftKings was holding seven percent of all money wagered (handle), compared to 7.2 percent for its peers in the same period.
Greff does not contemplate any repurchases of DKNG shares, but notes that the company has $1.7 billion cash on hand, with an additional $500 million available through a revolving line of credit. He maintains a $53 per share price target on the stock, finding it "pretty appealing for a (the only) pure-play, high-growth U.S. digital OSB and iGaming operator."
