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DraftKings Earnings in Review

February 28, 2023 6

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DraftKings Earnings in Review

DraftKings is pushing towards hitting EBITDA profitability in 2024. However, analysts at Roth MKM suggest that while the company has accelerated its cost-cutting measures, it may still struggle to reach EBITDA margins of even 20% due to high fixed costs and “sticky” gross costs such as taxes.
Even if DraftKings’ market share expands, Roth does not believe EBITDA margins can reach 20% unless industry gross gaming revenue (GGR) reaches $30bn or higher. Roth also notes that for DraftKings to reach its long-term gross margin target of 56%, it would need an uptick in newly regulated states to balance out the 51% in New York, which may be challenging given the recent legislative committee hearing. Finally, Roth suggests that DraftKings’ more optimistic gross margin expectation compared to FanDuel’s seems aggressive, given that FanDuel’s parent company Flutter has a longer operating history and greater scale as the largest iGaming operator globally.

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