As the legalization of sports betting spreads across US states, DraftKings (DKNG) is at the forefront of the online betting industry. Amid a huge move since its debut in April 2020, is DKNG stock a buy?
The growing legalization of digital sports betting is an emerging trend. The November 2020 election results showed that voters in several states broadly approved ballot measures that legalized sports betting and other gambling expansion measures.
DraftKings, headquartered in Boston, Massachusetts, is poised to capitalize on this burgeoning shift in state attitudes toward sports betting. DraftKings is an online sports platform that allows users to play daily fantasy games and win cash prizes.
DraftKings is on the road to profitability. After losing $3.95 per share in 2020, the company is expected to lose $3.60 per share in 2021 and $2.40 per share in 2022, according to IBD data.
DraftKings Stock Fundamental Analysis: Strong Earnings Growth
On Nov. 5, DraftKings missed third quarter earnings and revenue targets. The company lost an adjusted $1.35 per share on revenue of $212.8 million. Meanwhile, management raised the midpoint of its fiscal 2021 revenue forecast to $1.26 billion from the previous midpoint of $1.25 billion. Analysts have forecast $1.29 billion. The company expects revenue of between $1.7 billion and $1.9 billion for fiscal 2022.
Chief Financial Officer Jason Park said in a statement that revenue would have been $40 million higher had it not been for “lower-than-expected sustain primarily due to unexpected NFL game results.”
DraftKings IBD Stock Ranking
Due to the company’s lack of profitability, DraftKings’ EPS rating is low at 23 out of the best possible 99. The EPS rating measures a company’s ability to increase earnings year over year, using the last two quarters and the last three. to five years of earnings growth.
According to the IBD Stock Checkup, DKNG stock is trading at a low 23 out of a perfect IBD composite rating of 99. The composite rating helps investors easily gauge a stock’s fundamental and technical parameters.
DraftKings Stock News
On January 26, 2021, DraftKings jumped more than 5% after Goldman Sachs moved DKNG stock from neutral to long, while raising the price target from 45 to 65. Meanwhile, Bernstein started the hedge with an outperform rating and a price target of 71.
According to Goldman analyst Stephen Grambling, “We are upgrading DKNG to Buy because we expect continued selling off of the consensus, driven by 1) a sustainable leadership position in new and existing markets, 2) the ability to participate in the economy of single-operator states, and 3) the presence of national partnerships that should allow them to accelerate their growth and expand faster than the larger peer group.”
On February 8, Ark Invest added a total of 502,400 stocks to its ETF portfolio. On February 1, Cathie Wood’s Ark Invest disclosed a new position of 620,300 shares on February 1 for the ARK Next Generation Internet ETF (ARKW).
On March 4, DraftKings announced an agreement with the UFC to be its official bookmaker and “daily fantasy partner” in the United States and Canada.
On April 15, DraftKings and the National Football League said the sports entertainment and gaming company would become an official sports betting partner of the NFL. The NFL and DraftKings also said that DraftKings’ relationship as the exclusive Official Daily Fantasy Partner of the NFL will be extended.
On June 15, short seller Hindenburg Research issued a bearish report on the stock. The report claims that a subsidiary of DraftKings has ties to organized crime.
On August 9, DraftKings reached an agreement to buy Gold nugget online (GNOG) in an all-stock transaction valued at approximately $1.56 billion.
On October 26, DraftKings declined to make a binding offer for sports betting giant Entain.
On November 4, the National Basketball Association announced an expanded multi-year relationship to make DraftKings a co-official sports betting partner to the league. The deal grants DraftKings broad NBA rights and assets to incorporate into its sportsbook, daily fantasy sports, iGaming, and freebie products and promotional offers.
DKNG Stock Technical Analysis
On April 24 of last year, DraftKings stock broke above a buy point of 19.60 in a cup basis. The shares are up as much as 128% since the buy point before the formation of the next base.
After falling 38%, the stock formed the right side of a cup base with a buy point of 44.89. DraftKings broke on September 14, 2020 and quickly rose to 43%. But the stock could not hold onto its lofty gains and they dissipated over the following weeks. DKNG stock gave up an entire double-digit gain from a previous buy point of 56.08 in a cup with handle, according to IBD MarketSmith’s chart analysis.
After a round-trip sell signal, stocks are consolidating strongly below their 10-week moving average and their long-term 40-week line. There is no new buy point due to recent weakness in the stock. Shares are more than 60% off their 52-week high.
Is DKNG Stock a buy it now?
DKNG stock fell almost 7% on Friday, trading around 22.59 to hit a new 52-week low.
DraftKings is a promising long-term prospect in the sports betting industry, and the potential for the business is encouraging. Despite a lack of revenue, the company has tremendous revenue growth and is one of the leaders of the online betting megatrend. Wait for DKNG stock to cross a new buy point. Given that the stock is over 60% off its 52-week high and not a new buy point, it is not a buy at this time.
For more leading stocks and stocks approaching the buy points, check out these lists of IBD stocks, such as stocks near the buy zones. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen to learn more about growth stocks and the stock market.
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