DraftKings Rallied This Week, However Jim Chanos Stays Bearish


Posted on: March 18, 2022, 02:56h. 

Final up to date on: March 18, 2022, 05:33h.

Kynikos Associates founder Jim Chanos continues to be bearish on DraftKings (NASDAQ:DKNG), even though the web sportsbook operator’s shares surged almost 22 % this week.

Chanos DraftKings
Kynikos founder Jim Chanos, seen right here in 2015. He advised CNBC in the present day he stays quick DraftKings. (Picture: Rick Wilking/Reuters)

In an interview in the present day with CNBC, the famed quick vendor reiterated his unfavorable views on the gaming firm, calling it one among his favourite shorts. Chanos revealed his agency’s bearish place in DraftKings on CNBC final December, and the inventory is down about 28 % since then.

That sparked a public rift with DraftKings cofounder and CEO Jason Robins, who criticized Chanos’s math abilities on Twitter. In in the present day’s CNBC interview, the Kynikos founder acknowledged he made a mathematical error in his authentic feedback on DraftKings, and that the gaming firm’s authorized workforce despatched him correspondence to that impact. However he’s nonetheless forecasting draw back for the inventory.

That is the essential theme I wish to get throughout. For shares which have gone down, a whole lot of fundamentals have truly dropped at or worse than the shares have declined,” stated Chanos.

In speaking about “my buddy Jason’s firm” — that means DraftKings — Chanos notes the consensus 2025 earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) estimate was $360 million when the Kynikos founder appeared on CNBC final December. It’s now $260 million.

Gloomy DraftKings View

In his preliminary evaluation of the gaming firm, Kynikos boss stated the enterprise mannequin is flawed, and the operator is destined to proceed shedding cash.

Whereas some rivals, together with BetMGM and Caesars Sportsbook, are eyeing breakeven or modest EBITDA income in late 2023, the view on DraftKings is extra murky. Some analysts say it could possibly be 2024 or 2025 earlier than the Boston-based firm ceases shedding cash.

“In impact, DraftKings in the present day is promoting on the similar 2025 EBITDA a number of because it was in December,” stated Chanos.

That suggests the gaming firm stays overvalued. Chanos provides that since his CNBC look just a few months in the past, DraftKings’ 2022 EBITDA loss estimate has gone to $900 million from $500 million.

“Issues are getting worse there, not higher,” in line with the quick vendor.

On the shut of US markets in the present day, DraftKings inventory resides 73.62% under its 52-week excessive, and 31.06% above its 52-week low. On that foundation, the shares have to greater than triple to return to the previous excessive of $74.38.

Wynn, Too

Chanos has a prolonged historical past of being bearish on China and a few of that nation’s most generally adopted shares, and that view isn’t altering.

On a associated word, he advised CNBC in the present day that Kynikos maintains a brief place in Wynn Resorts (NASDAQ:WYNN), which operates two built-in resorts within the Chinese language territory of Macau.

Chanos revealed that bearish place final September when Wynn was buying and selling round $80, saying the shares ought to reside within the $40s. The inventory closed at $79.65 in the present day.

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