As sports betting legalization spreads across US states, DraftKings (DKNG) is at the forefront of the online gambling industry. Is DKNG stock a bargain, amid a massive move since its April 2020 debut?
The increasing legalization of digital sports betting is an emerging trend. November’s election results showed that voters in several states had largely passed approved ballot measures that legalized sports betting and other gambling expansion measures.
DraftKings, headquartered in Boston, Mass., is poised to capitalize on this burgeoning shift in the state’s attitude 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 projected to lose $2.83 per share in 2021 and $1.89 per share in 2022, according to IBD data.
DraftKings Stock Fundamental Analysis: Strong Sales Growth
On August 6, DraftKings reported better-than-expected loss and revenue figures, although user growth lagged. DraftKings lost an adjusted 26 cents as revenue grew 320% to $298 million. Monthly unique payers were up 281% to 1.1 million. Average sales per MUP reached $80, up 26% from a year earlier.
DraftKings raised its full-year revenue target to $1.21 billion – $1.29 billion from May’s forecast of $1.05 billion – $1.15 billion. Wall Street had expected $1.173 billion.
DraftKings IBD Stock Ratings
Due to the company’s lack of profitability, DraftKings’ EPS rating is a weak 10 out of the best possible 99. The EPS rating measures a company’s ability to increase profits year over year, using the most recent two quarters and earnings growth over the past three to five years.
According to the IBD stock control, DKNG stock shows a mild 60 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical statistics.
DraftKings Stock News
On January 26, DraftKings rose more than 5% after Goldman Sachs upgraded DKNG stocks from neutral to buy, while the price target was raised from 45 to 65. Meanwhile, Bernstein started with an outperform rating and a price target of 71.
According to Goldman analyst Stephen Grambling, “We are upgrading DKNG to Buy as we expect sales to continue to rise versus consensus driven by 1) continued market leadership in new and existing markets, 2) the ability to participate in states’ economies with one operator, and 3) presence of national partnerships that should enable them to grow and scale faster than the broader peer group.”
On February 4, the company announced it expanded its exclusive daily fantasy partnership with the NFL to Canada. Previously, the DraftKings-NFL deal was limited to the US
On February 8, Ark Invest added 502,400 stocks to its portfolio of ETFs. On February 1, Cathie Wood’s Ark Invest announced a new holding of 620,300 shares as of February 1 for the ARK Next Generation Internet ETF (ARKW).
On February 19, Oppenheimer raised his price target from 65 to 80, while maintaining an outperform rating. The analyst cited optimism ahead of fourth-quarter sports betting results.
On March 3, DISH Network and DraftKings announced a strategic agreement to deliver the DraftKings app on the DISH TV Hopper platform. The agreement also enables future DraftKings sportsbook and daily fantasy experiences with DISH Network’s SLING TV and Boost Mobile in the future.
On March 4, DraftKings announced a deal with the UFC to become its official sportsbook and “daily fantasy partner” in the US and Canada.
On April 15, DraftKings and the National Football League said: that the sports entertainment and gaming company becomes an official NFL sports betting partner. The NFL and DraftKings also said that DraftKings’ relationship as the NFL’s exclusive official daily fantasy partner will be extended.
On April 26, Needham began reporting DraftKings with a buy rating and price target of 81.
On June 15, short seller Hindenburg Research released a bearish report on the stock. The report alleges 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.
DKNG Technical stock analysis
On April 24 last year, DraftKings stock broke above a buy point of 19.60 on a cup basis. Shares rose a whopping 128% from the buy point before the next base was formed.
After falling 38%, the stock formed the right side of a cup base with a buy point of 44.89. DraftKings broke out on September 14, 2020 and quickly surged a whopping 43%. But the stock failed to maintain its hefty gains and they disappeared over the next few weeks. According to the IBD MarketSmith chart analysis, DKNG stock gave up the entirety of a double-digit gain from a previous 56.08 buy point in a handle cup.
Following a sell-back signal, the stock is above their 10-week moving average and above their 40-week long-term line.
The stock tracks a new cup with handle that offers a buy point of 64.68. Shares are about 7% away from the new listing.
Is DKNG Stock a sale now?
DraftKings equities are a promising long-term prospect in sports betting, and the company’s potential is encouraging. Despite a lack of revenue, the company is experiencing tremendous revenue growth and is one of the leaders in the online betting megatrend.
DKNG shares fell more than 6% on Tuesday CNBC reported: DraftKings makes a $20 billion bid to acquire UK online sports betting company Entain. Wait for DKNG shares to rise above the new buy point. Since the stock is not at the new buy point, it is not a buy at this time.
For more leading stocks and stocks approaching buying points, check out these IBD stock lists, such as the stocks near buy zones. Check out IBD’s signature daily analysis, The Big Picture, to see the current trend in the stock market.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on growth stocks and the stock market.
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