DraftKings Delivers An Uppercut To The Competition After Deals with UFC, DISH Network
Stocks
March 9, 2021
Ladies and gents, presenting your online sports betting heavyweight champion – DraftKings.
A week after DraftKings reported strong fourth-quarter earnings, the champ is making waves by striking new deals with UFC and Dish Network.
Strike while the iron is hot
Since the US Supreme Court voted to give individual states the option to legalize online/offline sports betting in 2018, the potential $150b industry has been on the rise.
Backed by sports legends like Michael Jordan, DraftKings grew to become the largest sports betting operator in the US. And they’re making moves to keep that title… Over the past few weeks, DraftKings made deals with:
- The UFC to be its first official sportsbook and daily fantasy partner in the US and Canada
- Dish Network, in a partnership that’ll enable Dish customers to set up sports bets directly through their television
On Mar. 1, it was even rumored that DraftKings had intentions to buy Score Media & Gaming, a Canadian sports media and betting company.
DraftKings has a marketing addiction
Draftkings fueled its aggressive growth with high marketing expenses – spending up to $400 to acquire each customer. As a result, the company is losing a significant amount of money to fuel its growth.
In its recent earnings release, they reported:
- $614m in 2020 sales, up 91% from 2019
- $844m in 2020 net loss, up from a loss of $142m in 2019
- 1.5m monthly unique players, up 44% from the end of 2019
While investors are prioritizing growth over profits in the short-term, the lack of profitability could become a concern as the company grows.
The biggest surprise from DraftKings: raising its 2020 sales forecast by 20% to $900m-$1b which sent its stock up nearly 20%.
For investors… Rising bets lifts (nearly) all betting stocks
The Roundhill Sports Betting & iGaming ETF ($BETZ) — a basket of over 40 companies in the online sports betting/gaming industry — is up 84% in the past year. With upcoming legalizations in various states, the entire industry could continue to see growing sales.
What to watch out for: the potential market size in the US sports betting industry are only forecasts. If growth slows and the potential market size turns out to be smaller than expected, the entire industry could fall.
More resources on the US sports betting industry:
