As sports-betting legalization spreads across U.S. states, DraftKings (DKNG) is at the forefront of the online betting industry. Amid a huge move since its April 2020 debut, is DKNG stock a buy?
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The expanding legalization of digital sports betting is an emerging trend. The November election results showed voters in several states largely approved ballot measures that legalized sports betting and other gaming expansion measures.
Boston, Mass.-headquartered DraftKings is primed to take advantage of 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 a share in 2020, the company is expected to lose $3.11 per share in 2021 and $2.13 per share in 2022, according to IBD data.
DraftKings Stock Fundamental Analysis: Strong Revenue Growth
On Nov. 5, DraftKings missed Q3 earnings and revenue targets. The company lost an adjusted $1.35 per share on revenue of $212.8 million. Meanwhile, management boosted the midpoint of its revenue guidance for fiscal 2021 to $1.26 billion vs. the previous midpoint of $1.25 billion. Analysts have projected $1.29 billion. The company sees revenue between $1.7 billion and $1.9 billion for fiscal 2022.
CFO Jason Park said in a statement that revenue would have been $40 million higher if not for “lower-than-expected hold primarily due to unexpected NFL games outcomes.”
DraftKings IBD Stock Ratings
As a result of the company’s lack of profitability, DraftKings’ EPS Rating is a weak 18 out of a best-possible 99. The EPS Rating measures a company’s ability to grow profits year over year, using the most recent two quarters and the past three to five years of earnings growth.
According to the IBD Stock Checkup, DKNG stock shows a weak 14 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.
DraftKings Stock News
On Jan. 26, DraftKings surged over 5% after Goldman Sachs upgraded DKNG stock from neutral to buy, while raising the price target from 45 to 65. Meanwhile, Bernstein started coverage with an outperform rating and a 71 price target.
According to Goldman analyst Stephen Grambling, “We upgrade DKNG to Buy as we expect ongoing sales beats versus consensus driven by 1) sustained market leading position in new and existing markets, 2) ability to participate in the economics of single operator states, and 3) presence of national partnerships that should allow them to accelerate growth and achieve scale sooner than the broader peer group.”
On Feb. 8, Ark Invest added 502,400 total shares in its portfolio of ETFs. On Feb. 1, Cathie Wood’s Ark Invest disclosed a new position of 620,300 shares on Feb. 1 for the ARK Next Generation Internet ETF (ARKW).
On March 4, DraftKings announced a deal with the UFC to be its official sportsbook and “daily fantasy partner” in the U.S. and Canada.
On April 15, DraftKings and the National Football League said that the sports entertainment and gaming company will become an NFL official 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 June 15, short seller Hindenburg Research published a bearish report on the stock. The report claims that a DraftKings subsidiary has ties to organized crime.
On August 9, DraftKings reached an agreement to buy Golden Nugget Online (GNOG) in an all-stock transaction worth about $1.56 billion.
On Oct. 26, DraftKings declined to make a firm offer for sports betting giant Entain.
On Nov. 4, the National Basketball Association announced an expanded multiyear relationship to make DraftKings a co-official sports betting partner of the league. This agreement grants DraftKings expansive NBA rights and assets to integrate within its sports betting, daily fantasy sports, iGaming and free-to-play products and promotional offerings.
DKNG Stock Technical Analysis
On April 24 last year, DraftKings stock broke out above a 19.60 buy point in a cup base. Shares advanced as much as 128% from the buy point before the formation of the next base.
After a 38% decline, the stock formed the right side of a cup base featuring a 44.89 buy point. DraftKings broke out on Sept. 14, 2020 and quickly rose as much as 43%. But the stock couldn’t hold its lofty gains and they dissipated over the next few weeks. DKNG stock gave up the entirety of a double-digit gain from a previous 56.08 buy point in a cup with handle, according to IBD MarketSmith chart analysis.
Following a round-trip sell signal, shares are consolidating below their 10-week moving average line and their long-term 40-week line. There is no new buy point due to the stock’s recent weakness. Shares are over 40% off their 52-week high.
Is DKNG Stock A Buy Right Now?
DraftKings stock is a promising long-term prospect in the sports-betting industry, and the company’s potential is encouraging. Despite a lack of earnings, the company has huge revenue growth and is one of the leaders in the online betting megatrend. Wait for DKNG stock to break out past a new buy point. Since the stock is not at the new buy point, it is not a buy right now.
DKNG stock tumbled over 4% Wednesday and is at its lowest level since May 13.
For more leading stocks and stocks approaching buy points, check out these IBD Stock Lists, like the Stocks Near 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 for more on growth stocks and the stock market.
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