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DraftKings stock plunges further on 2022 loss estimate

With strong rivals, attracting new customers is expensive.

The logo for DraftKings is displayed on a laptop computer in 2020.Bloomberg/Photographer: Bloomberg/Bloomber

The surge in online gambling has continued to fuel DraftKings’ coffers, but the Boston company’s increasing losses have spooked the stock market.

Shares of DraftKings, already down 20 percent this year, plunged more than 21 percent on Friday after the company released its fourth-quarter results.

The company is engaged in an expensive battle with rivals including FanDuel and Caesars Sportsbook as more and more people turn to online wagering. The costs of acquiring new customers can include everything from mobile and TV ads (see the Super Bowl) to giving away free cash for starting bets.

In the fourth quarter, DraftKings’ sales increased 47 percent from a year earlier to $473 million as more states legalized online wagering. DraftKings reported a net loss of $326 million, 34 percent worse than a year earlier.

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While the revenue and loss for the fourth quarter were better than Wall Street analysts expected, DraftKings disappointed investors by forecasting that it would lose $825 million to $925 million in 2022 on an adjusted basis. Revenue for 2022 was forecast at $1.85 billion to $2 billion, up from $1.3 billion in 2021.

“DraftKings’ strong fourth quarter performance exceeded our expectations on the top and bottom line,” cofounder and chief executive Jason Robins said in a statement. “We enter 2022 positioned to grow our market share.”

The company’s results in 2022 should get a boost as more states legalize online betting. So far this year, DraftKings has added Oregon, Louisiana, and New York.

Robins explained that DraftKings was profitable excluding some costs in states where it had been operating for a few years. If DraftKings had not added new states like New York and Louisiana this year, the company would have been profitable overall on an adjusted basis by the end of 2022, he told analysts. Now, the milestone could be reached by the end of 2023, he said.

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Morgan Stanley analyst Thomas Allen called the profit explanation “encouraging, though somewhat confusing,” in a research note after the earnings announcement.

In New York, DraftKings attracted 100,000 first-time online gamblers in less than 24 hours. In prior launches, it had taken 17 days to attract that many gamblers in Arizona and 170 days in New Jersey, Robins said, defending the company’s substantial marketing expenses.

“Typically the first year, sometimes two years, of customer acquisition are the strongest cohorts that you acquire,” he said. “I think it’s really important that we continue to invest there.”







Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him on Twitter @ampressman.