DraftKings stock rises to 52-week high following Q1 earnings

The Yahoo Finance Live team discusses a jump in DraftKings stock after a positive Q1 earnings report.

Video transcript

AKIKO FUJITA: Let's talk about DraftKings now. That is my pick for the day. That stock hit a 52 week high today, soaring more than 15% on better than expected results. And that's kind of putting it mildly here.

Revenue rose 81% compared to the same period last year, while the company also boosted its outlook for the year. CEO Jason Robbins saying DraftKings is now poised to reach profitability on an adjusted EBITDA basis in the near term. But analysts remain divided on the path to profitability. You had Needham's Bernie McTernan saying DraftKings performance in the quarter provides encouraging data points for the future profitability of the enterprise.

Stifel analysts saying, though, profitability remains several quarters away with the risk of market share compression in China. A lot of people looking at where that next market is saying, there's not a lot of states that are now going to be opening up for sports betting. And that's going to be part of the challenge in terms of being able to maintain this kind of growth for DraftKings.

SEANA SMITH: Yeah, certainly. You're right there, Akiko. The growth extremely impressive there. You mentioned that revenue growth on a year over year basis-- also monthly unique payers, 2.8 million. That's up 40% from just a year ago.

And you're talking about those types of gains outside of the heart of football season. Yes, you had the Super Bowl, but March Madness was a huge win here for DraftKings.

But the company will really need to step up and really try to separate itself from the competitors within the space, because we know right now it's a second player here to FanDuel. FanDuel certainly accounts for most of the market share.

We've heard some reports-- there was a Bloomberg report just over a week ago that DraftKings is planning its own streaming service, really pushing into the video space to better compete with some of the offerings that FanDuel has. But we'll see what is going to keep, if anything, really, can keep this type of momentum.

Because you talk about the fact that most of these states have already legalized gambling, when we talk about the ones that were going to do this in a timely manner. So you would think that growth is going to cool, and potentially pretty significantly.

- Yeah, that's certainly one of the headwinds coming up for DraftKings. I mean, look, the stock has outperformed the broader market in general in terms of what we're talking about this year in that context. So it's certainly doing well. And they say they're going to be hosting an investor day later this year.

But, yes, again, that headwind coming up of, which states will be coming down the pike in terms of legalization? We know Kentucky expected to happen this year, but it remains to be seen whether North Carolina or Vermont will occur in 2023, which would actually, in terms of the execution of that, happen in 2024.

So of course, in terms of people piling into the stock, sure, it's off the back of some strong numbers, and some of this is, obviously, buy the rumor, sell the news kind of play that we'll see. So we may see that stock continue to run up this year as a few other states come to the pipeline. But that's certainly one of the challenges that DraftKings has.