Shares of DraftKings (DKNG) tumbled Friday after the online sports gambling platform cut its profit forecast and announced it would put a surcharge on winnings for bettors in high-tax states as a way to boost earnings.
In a letter to shareholders, the company said that several states, notably Illinois, have put a high tax rate on gambling winnings. To address that, DraftKings said it plans to implement “a gaming tax surcharge on a customer’s Net Winnings in any state with a tax rate above 20% that has multiple sports betting operators.”
The company said that the surcharge “would be fairly minimal” to the customers, and that “additional upside potential exists for DraftKings’ adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2025 and beyond” from the new fee.
The news came as the company reported strong second-quarter results and a new $1 billion stock buyback plan. Adjusted earnings per share came in at $0.22, and revenue jumped 36.2% to $1.10 billion. Both exceeded forecasts.
DraftKings said the gains came primarily from several sources, including the addition of new customers and jurisdictions, and the impact of the acquisition of the Jackpocket lottery app.
DraftKings raised its full-year revenue outlook to $5.05 billion to $5.25 billion from the earlier estimate of $4.80 billion to $5.00 billion. However, it reduced its adjusted EBITDA guidance from $460 million to $540 million to $340 million to $420 million.
DraftKing shares fell nearly 10% on Friday, pushing the stock into negative territory for the year.
TradingView