DraftKings stock continues to rise after lowering expected losses for 2023

DraftKings (DKNG) stock rose more than 15% on Friday after the company reported its fourth quarter results. Wall Street has closely watched the sportsbook operator's path to profitability for years and on Friday DraftKings announced its increased focus on cost-cutting will cause the company to lose less money in 2023 than initially anticipated. All of this coming while the company continues to report record revenue amid increased gambling legalization.

"Our revenue was better than our prior guidance, primarily because of structural improvement in our Sportsbook hold and fundamentally better customer trends than we expected,"DraftKings CFO Jason Park told investors on Friday. "Customers are engaging more with our products and are less relying on promotions."

DraftKings positive results didn't have much impact on the sector as a whole as MGM Resorts International (MGM), Penn Entertainment (PENN), Caesars Entertainment (CZR) and Wynn Resorts (WYNN) had muted stock reactions on Friday.

Yahoo Finance's Seana Smith and Dave Briggs discuss from DraftKings' fourth quarter earnings call.

Key Video takeaways:

0:15 DraftKings key numbers

0:25 Hear from DraftKings CFO Jason Park

1:00 Where DraftKings sits in the growth cycle

1:20 Wall Street's reactions to DraftKings results

2:00 How DraftKings compares to competitors

Video Transcript

SEANA SMITH: A lot of earnings to sift through, so let's talk about some of the biggest movers, some of the biggest stories that we've covered this week. First up, DraftKings a huge mover today. Look at that-- a jump of just about 15%. The sports betting company soaring after beating revenue estimates for the fourth quarter, also narrowing its expected loss for 2023. Here's CFO Jason Park on what drove the company's success to end the year.

JASON PARK: Our revenue was better than our prior guidance primarily because of structural improvement in our sportsbook hold and fundamentally better customer trends than we expected. Customers are engaging more with our products and are less reliant on promotions.

SEANA SMITH: Certainly did help those results here, that DraftKings able to spend less on promotions. Sounds like they're building towards profitability, something that we know the Street certainly cares about, puts more of an emphasis on when we talk about these type of companies at this point in their maturity cycle. But those numbers and the growth numbers that they put up this past quarter were extremely impressive, Dave.

DAVE BRIGGS: It's incredible. It feels like the third quarter. We're not quite in the fourth, but the third for DraftKings. To your point, revenues up 80% year over year. Active members up 30% year over year. And I looked at a couple of notes here. And you talked about the different reasons to like DraftKings. BTIG upgrades to a hold-- to buy from hold. Jefferies, buy. They cite their fiscal discipline. They're finally beginning to cut some of those costs. They had a massive spend for years as they were trying to buy players.

Piper Sandley-- Piper Sandler, excuse me, overweight based on their customer retention. And then one more, Morgan Stanley, overweight, citing their path to profitability. So those are four different analysts with four different reasons they like the stock. And that's why you feel it's beginning to get somewhere near the goal line, at least seeing profitability. There are a couple of other major players, of course-- FanDuel, owned by Flutter, eyeing a US listing.

One other story I'm really eyeing in this sector is, of course, Fanatics. Still a private company. It's still not technically in sports gambling. But they did build their first ever sportsbook in Maryland, at the home of the Washington Commanders. So they're set to get on this field. Can they come anywhere near cracking those big three? Not likely. DraftKings in great position, entering this pivotal year.

SEANA SMITH: Yeah, they certainly are in great position. The average revenue per monthly unique player, that number that you were just talking about, that jumped 42% from a year ago to an average of 109. So, really talking about the fact that that is growing so exponentially on a year over year basis. And the Super Bowl numbers, we haven't heard anything specific from DraftKings, but what came out from its competitor, FanDuel, certainly sounds like sports betting was a hit there during the game last weekend.

DAVE BRIGGS: And we're going to get some more states online this year. And then we're going to start next year with the Super Bowl in Vegas. So this feels like a pivotal year in that space.