Company Overview
DraftKings, founded in 2012 as a daily fantasy sports (DFS) platform, pivoted to sports betting post-2018 U.S. legalization (PASPA repeal). DKNG operates in Sportsbook, Casino, and DFS across 25+ U.S. states, plus Ontario (Canada) and international markets. Key brands include Jackpocket (lottery) and Golden Nugget (acquired 2022).
As of Q3 2025, it boasts 3.1M MUPs and a $17.15B market cap; Beta: 1.60. 2025 guidance (revised Nov 2025): Revenue $5.9B-$6.1B (+24% YoY midpoint), adjusted EBITDA $450M-$550M (+inflection from 2024’s $131M).
DraftKings Inc. (NASDAQ: DKNG), a premier digital sports entertainment and gaming company, has shown resilient growth in 2025 despite headwinds from unfavorable sports outcomes and competitive pressures.
2025 YTD revenue has reached $4.06B (+21% YoY), with adjusted EBITDA at $276.6M hitting the positive for the first time, driven by a 12% rise in Monthly Unique Players (MUPs) to $3.1M.
Q3’s customer friendly sporting results (NFL) led to a $127M adjusted EBITDA loss in the period with DKNG lowering full year outlook in response. This contributed to a TTM earning per share (EPS) of (-$0.68). Over the past five years (2020-2024), revenu has compounded at ~65% CAGR, far exceeding the sector but persistent losses have delayed profitability and investors earlier expectations.
2025 Performance by Quarter
DraftKings’ 2025 reflects strong Q1/Q2 momentum from user acquisition and product innovation (e.g., DK Predicts beta with launch in Dec ’25). Q3 DKNG suffered from hold rate underperformance, dropping to 8.2% (vs. 9.5% expected).
| Quarter | Revenue ($B) | YoY Growth | Adjusted EBITDA ($$ M) | YoY Growth | GAAP EPS ( $$) | Adjusted EPS ($) |
|---|---|---|---|---|---|---|
| Q1 (ended Mar 31) | 1.409 | +20% | 103 | +360% | -0.07 | 0.12 |
| Q2 (ended Jun 30) | 1.513 | +37% | 301 | +135% | 0.10 | 0.38 |
| Q3 (ended Sep 30) | 1.144 | +4% | -127 | N/A | -0.45 (est.) | -0.15 |
| YTD Q1-Q3 | 4.066 | +21% | 277 | N/A | N/A | N/A |
Key Notes
- Q1: MUPs +12% to 2.9M; revenue miss vs. est. $1.46B; raised marketing efficiency.
- Q2: Record revenue beat; net income $158M; sportsbook handle +28% to $11.5B; reaffirmed upper-end guidance.
- Q3: $300M FY hold headwind; revenue miss with actual ~$1.14B v $1.21B est.; MUPs +10%; lowered full year guidance on outcomes.
- YTD Q1-3: Avg. revenue per MUP +7%; U.S. iGaming +32%. Q4 est. revenue $1.95B (projected to hit low-end guidance).
Five-Year Performance (2020-2024)
DraftKings scaled explosively post-IPO (2020 SPAC), capitalizing on U.S. expansion (25 states by 2024). Revenue quintupled, but EPS losses narrowed from integration costs incl. SBTech, SportsIQ, Simplebet and more. Stock returned ~15% CAGR, trailing S&P but resilient vs. peers amid 2022 downturn.
| Year | Revenue ($ B) | YoY Growth | Diluted EPS ( $) | YoY Change | Stock Price (Year-End) |
|---|---|---|---|---|---|
| 2020 | 0.75 | +150% (v ’19) | -2.12 | N/A | ~$18 |
| 2021 | 1.32 | +76% | -3.95 | -86% | ~$40 |
| 2022 | 2.24 | +70% | -3.94 | +0% | ~$13 |
| 2023 | 3.67 | +64% | -1.73 | +56% | ~$34 |
| 2024 | 4.77 | +30% | -1.05 | +39% | ~$38 |
Key Notes
- Revenue CAGR (2020-2024): 59% (from $0.75B to $4.77B), fueled by state launches and iGaming (40% of mix). Outpacing Flutter (~24% CAGR).
- EPS CAGR: Not applicable (losses); TTM 2024 improvement signals path to breakeven.
- Stock Price CAGR: 20% (end-2020 ~$18 to end-2024 ~$38), with 2025 YTD -9% (vs. S&P +16%), hit by Q3 miss but buoyed by $500M buyback.
What might Warren Buffett say ?
Buffett seeks durable moats, consistent ROE (>15%), and conservative balance sheets (debt/equity <0.5). DraftKings lags on profitability but continues to build scale.
| Metric | DraftKings TTM (2025) | Buffett Ideal | Rank (vs. Peers: Flutter, MGM) | Commentary |
|---|---|---|---|---|
| ROE | -29.59% | >15% | Low (Flutter -2%; MGM 5%) | Losses from scaling/marketing; historical avg. -25%; improving with 20% EBITDA margins in strong quarters. |
| Debt/Equity | 2.60 (260%) | <0.5 | Low (Flutter 1.3; MGM 2.1) | $3.2B debt funds growth; net debt/EBITDA 4.5x (target <3x by 2027); FCF positive $200M YTD. |
| ROIC | -6.5% (est.) | >10% | Low | Capital-intensive (tech/marketing); moat from data flywheel and 15% market share. |
| Earnings Consistency | Improving losses | Steady growth | Moderate | Q2 profitability milestone; volatility from holds (±$200M EBITDA). |
Overall Rank: 4/10. Compelling moat in digital-first ecosystem, but high leverage better suits turnaround plays over core holdings.
What might Peter Lynch say ?
Lynch targets PEG <1, 20%+ growth, and P/E below growth rate for multi-baggers. DraftKings fits as a “fast grower” with TAM upside
| Metric | DraftKings TTM (2025) | Lynch Ideal | Rank (vs. Peers) | Commentary |
|---|---|---|---|---|
| PEG Ratio | 0.67 | <1 | High (Flutter 0.8; MGM 1.2) | Undervalued on 35% 3-yr EPS growth est.; forward P/E 45x but P/S 3.1x vs. sector 3.5x. |
| Earnings Growth (5-Yr EPS) | N/A (losses) | >20% | Moderate | Adjusted EPS +200% 2024-25; revenue 59% CAGR proxy. |
| P/E (Forward) | 45x | < Growth Rate | Moderate | On $0.77 FY25 EPS est.; growth justifies premium if Predicts adds $500M revenue. |
Risks and Opportunities
- Risks: Outcome volatility ($300M 2025 drag); regulation (e.g., Illinois taxes, CFTC on prediction markets); competition (Flutter’s 56% share).
- Opportunities: DK Predicts nationwide (Q1 2026, +10% revenue); international expansion (UK iGaming); M&A (e.g., lottery synergies).
Conclusion and Guidance
DraftKings’ 2025 resilience and 5-year hypergrowth position it as a high-conviction bet on U.S. sports betting maturation ($150B TAM by 2030), despite short run Q3 earnings setbacks. At $35 December 2025, tracking strong Q4 earnings (to be officially announced in Feb 2026) DKNG should be a hold with expected recovery. Upside to $50+ (last achieved Feb 2025). Downside: 20% to $28 should earnings below projections be prolonged, unlikely.
Wagering America 
Leave a comment