DraftKings in Three Words: Popular Global Sportsbook

Background

DraftKings' mission statement is to build the best, most trusted, and most customer-centric destination for skin-in-the-game fans. It wants to transform the manner in which people experience sports, by allowing them to participate in a wide selection of wagers on the sports and events they are watching.

The company was born at the perfect time, with former Vistaprint and CapitalOne employees Jason Robins, Paul Liberman, and Matt Kalish founding DraftKings in 2012. Well-aware of the PAPSA, they created contests that would involve prizes awarded based on the outcomes of baseball games. These were not direct wagers, but they did pay out real money to the winning participants. And rather than waiting for the entire season to complete (as was common for most fantasy sports apps), players could receive prizes on a daily basis. The traffic to their app increased quickly, and within a year DraftKings brought in Major League Baseball and venture capitalists as new investors.

The company's big break came in the summer 2018 when the PAPSA was declared unconstitutional. Two months later, DraftKings launched its new "Sportsbook" app that allowed people to bet on specific games. It went public in April 2020 through a SPAC merger, raising $813 million in total capital to capitalize on the growing interest in online gambling.

Fast-forwarding to today, DraftKings grew its revenue in 2024 by 30% to $4.8 billion and its customer base by 42% to 10 million. With minimal reinvestment needs, it benefits greatly from operating leverage and its additional revenues fall quickly to the bottom line. Its forward guidance for fiscal 2025 is anticipating 34% revenue growth to $6.45 billion. And due to that operating leverage, it's expecting $950 million of Adjusted EBITDA -- more than 5X greater than the $181 million it generated last year.

Now that it is organically generating EBITDA and free cash flow, DraftKings has more options at its disposal that would reward its shareholders. The company executed its first repurchase worth $48 million, and CEO/co-founder Jason Robins has mentioned an interest in issuing debt to optimize its capital structure.

That's probably a good move. As more states legalize online sports betting the the company's income stream becomes more predictable and reliable, shrewd moves like swapping out equity for debt could reduce the discount rate and increase its intrinsic value per share.

Combined with the stock now selling near its 52-week low, DraftKings might be a company worth betting on.

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DraftKings initially joined the 7investing Watch List of New Ideas in April 2025.