Thread by @puppyeh1

The $DKNG analyst day slides were quite something. I have no idea how anyone can own the stock at a ~$32bn EV and expect anything other than a HORRID risk/reward the next 5+ years...the math is pretty simple. let's take a peak 👀

THREAD

They disclosed their LT EBITDA 'guidance' as $1.7bn - based upon a fairly rosy set of assumptions but basically 65% penetration of OSB, 30% pen of iGaming, then just rolling forward another 5yrs 🤣. Ie this EBITDA number, even if actualized, is prob a 7-10yr aspiration:

So today we get to pay ~25x 7-10yr forward maybe adjusted EBITDA. Nice 🤪🤪

It gets worse. How do they actually get to this number? Well they try to size the market at maturity, using UK, Aus, and the more mature NJ market...

Buried in the footnotes you'll see Aus + UK see ~$90 per adult in gross revs from sports betting alone; the nos from NJ are ~$52 today (but its still an immature mkt):

OK so $90/adult from sports betting. Note that these numbers are WAY ahead of what even NJ is printing today (3 full yrs in to legalization) but hey let's roll w it.

What about iGaming? Here $DKNG use NJ to extrapolate ~$140-160/revs per adult at maturity:

OK so call is $150/adult in iGaming and $90/adult in OSB, so $250/adult in total gross revs, at maturity.

In the UK today, the total gambling market is ~$400/adult (14.3bn GBP GGR, 50.3mm adults, 1.4 FX) - so this doesn't sound absurd...

...but $DKNG is saying they will earn terminal ~32% EBITDA margins on this GGR number:

Keep in mind though that Bet365 - the world's largest/best pure-play online operator - with total GGR MUCH larger at maturity - only earns ~25% EBIT margins:

igamingbusiness.com/revenue-and-pr…

This is w much less competition; higher GGR/adult; etc etc.

So basically you're pay 25x 7yr (at least) forward EV/EBITDA, and >50x 7-10yr forward free cash flow if it all works out - and you're committed to getting diluted heavily along the way. Ouch 😑😑

(Discl: no position)