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 $3.26 a share in 2019, the company lost $2.76 a share in 2020. Analysts expect the company to lose $1.42 in 2021 and $1.00 per share in 2022, according to IBD data.
DraftKings Stock Fundamental Analysis: Strong Revenue Growth
On May 7, DraftKings reported a smaller-than-expected loss and booming revenue growth. DraftKings lost 36 cents a share as revenue jumped 252% to $312 million.
Monthly unique paying customers surged 114% to 1.5 million. Average revenue per user climbed 48% to $61.
The company raised its full-year revenue target to $1.05 billion-$1.15 billion, up from a prior view of $900 million-$1 billion and above consensus estimates for $999.7 million.
DraftKings IBD Stock Ratings
As a result of the company’s lack of profitability, DraftKings’ EPS Rating is a weak 27 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 mild 34 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. 5, New York Gov. Andrew Cuomo announced legislation to allow mobile sports gambling in the state.
“New York has the potential to be the largest sports wagering market in the United States, and by legalizing online sports betting we aim to keep millions of dollars in revenue here at home, which will only strengthen our ability to rebuild from the COVID-19 crisis,” Cuomo said in a statement.
On Jan. 22, Michigan launched online sports betting and casino games.
On Jan. 24, DraftKings announced the launch of DraftKings Sportsbook in Virginia, marking the 12th state in which DraftKings is available.
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. 4, the company announced it expanded its exclusive daily fantasy partnership with the NFL to Canada. Previously, the deal between DraftKings and the NFL was limited to the U.S.
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 Feb. 19, Oppenheimer boosted its price target from 65 to 80, while maintaining an outperform rating. The analyst cited optimism ahead of the sports betting company’s fourth-quarter results.
On March 3, DISH Network and DraftKings announced a strategic agreement to provide the DraftKings app on the DISH TV Hopper platform. The agreement also allows for subsequent 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 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 April 26, Needham initiated coverage on DraftKings with a buy rating and an 81 price target.
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.
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 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 below their 10-week moving average line and long-term 40-week line.
The stock is about 40% off its 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.
DKNG stock dived over 6% Wednesday. Since the stock is far from its old highs, it is not a potential buy right now. Wait for DKNG stock to form a new base, which would offer a new buy point.
DraftKings was featured as the IBD Stock Of The Day on Feb. 2.
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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