DraftKings focused on in-game wagering opportunities in the US

DraftKings CEO Jason Robins said the company is developing more in-game betting opportunities for its sports wagering website, and said it is the firm’s top focus from a product perspective.

He explained that in the UK, in-game is about 75% of the revenues at sportsbooks while it’s much lower in the US. “You can bet on almost anything in an EPL (English Premier League soccer) game including who will get the next yellow card. Arguably, US sports like baseball are better built for this because of the stoppage in play,” he said in an interview with Barron’s last week. He noted in baseball there is much opportunity to make prop bets, referring to wagers unrelated to the outcome of the game. Outside the US, tennis is popular for in-game wagering, with people betting on every point, Robins said.

DraftKings offered in-match odds on screen during the broadcast of the recent charity pro-am golf match between the team of Tiger Woods and Peyton Manning against Phil Mickelson and Tom Brady. DraftKings offered betting on the individual holes and the overall match, which was narrowly won by Woods and Manning. The match was the biggest golf event ever for DraftKings, doubling its previous top handle, a company spokesman said last week. The in-game betting was a major factor, and golf is well-suited to it.

DraftKings stock has surged about 70% since April, valuing the company at $10 billion, behind only Las Vegas Sands in the US gambling sector. DraftKings has been on a roll in the past few months even though major US sports are on hold. The company had a strong first-quarter pre-Covid 19, and went public in late April when it completed a merger with Diamond Eagle Acquisition, a special-purpose acquisition company. The deal had been unveiled in late 2019.

The investor excitement about the growth prospects for online sports betting in the U.S. is evident in the valuation of DraftKings, which is valued like a cloud computing stock at about 14 times next year’s projected revenues. Some analysts think DraftKings may turn a profit starting in 2023. 

The company has outlined a path to $1 billion in annual earnings before interest, taxes, depreciation and amortization (Ebitda), but has not said when it expects to get there. Analysts have estimated that may not happen until after 2025.

Investors’ enthusiasm is being fed by the company’s asset-light online focus and expectations that mobile sports betting will be legalized in more states in the coming years. “We think that being a digital-first company has some pluses, in addition to the general migration to online channels,” Robins said. Younger bettors like sports and prefer to wager on their phones.

DraftKings is live in seven states, including New Jersey and Pennsylvania, with another seven having legalized online sports betting. On the company’s first-quarter conference call earlier in May, Robins said he was still comfortable with prior projections for 2021, notably about $700 million in revenues. 

DraftKings CEO said the company is expecting the sports calendar to be full enough for it to achieve those numbers. He is looking ahead to what could be a busy second half of 2020 with Major League Baseball contemplating a start to the season around July 4 and the National Football League set to begin on schedule in September. That could be widened by postponed events like golf’s Masters Tournament now on tap for November and the French Open tennis tournament, which is set to start in late September.

Without major sports, DraftKings has seen surprisingly strong interest in fantasy sports and betting on a range of what is still being played, including e-sports, Korean baseball, German professional soccer, and table tennis.