Draftkings a risky bet.
Online sports betting has grown into a full-blown industry of its own lately. Here is the breakdown of $DKNG otherwise known as Draftkings Inc.
Current Price: $35.36
52/Wk High: $44.79
52/Wk Low: $9.84
Read below for the breakdown!
Draftkings is an online sports entertainment and gaming business in which offers igaming, fantasy sports, and most importantly sports betting.
Due to COVID-19 many sports-related companies such as $DKNG took major hits but since the March lows and the return of some professional sports, many ask if $DKNG is a buy.
While COVID-19 poses multiple obvious threats to the company, Draftkings continued to grow through the introduction of more offerings in Colorado, Pennsylvania, Illinois, and West Virginia, all the while starting to pursue other states such as Michigan and Tennessee.
Digging into the most recent earnings report Draftkings reported a huge miss to the downside leaving investors wondering if it is worth the investment.
$DKNG reported a Q2 miss with an EPS of $-0.55 versus the expected $-0.20. Not only that but revenue also came in at a low $75.0 million.
Furthermore, when digging into the financial standing of $DKNG, the company is debt-free and when last reported had a solid cash on hand level of $1.2 billion.
When it comes to forecasting, management released fiscal year guidance with expected 2020 revenue to be in the range of $500 million to $540 million.
Furthermore if the fiscal year 2020 revenue goals are hit, the company will have grown its revenue 22% to 37% in the back half of 2020.
While the guidance seems great Daftkings management noted that the guidance was based on an assumption of no changes to the sports scheduling and that COVID-19 would no longer interfere.
While earnings have not been great and COVID-19 continues to pose a threat, analysts remain very bullish on $DKNG.
Currently, the average price target for $DKNG is $48.60/share, representing a huge 37.44% upside. Not only that but the high and low price targets seem even more bullish on the future.
The high price target currently sits at a whopping $60.00/share representing a massive 69.68% upside and the low price target is $34.00/share, representing a slim -3.85% loss.
While analysts remain to seemingly be very bullish on $DKNG, the big money is not as much.
Currently, just 50.28% of $DKNG is owned by institutions. Top holders include Atlas Venture, Capital Research Global Investors, and finally The Raine Group.
It is also worth noting that Walt Disney ($DIS) also owns a major amount of $DKNG, with a position worth $358.7 million.
Finally digging into the technicals the stock has run a massive amount since its IPO just last year. On the otherhand, since April it has run flat and could be flashing a buying opportunity.
Currently, according to the 6-month charts, the 6-month RSI sits at a neutral 49.35. SImply based on RSI this would not be a bad buy but as we all know, RSI is not everything.
Secondly, the 6-month MACD sits at 0.62 but does not seem to be building much momentum either way. Lastly, the 6-month CCI sits at 25 and looks to be cooling off.
In reference to earnings and current stock price the current price to earnings ratio also sits at a huge 641.63, which is in my personal opinion a very dangerous position.
Overall I believe $DKNG is a risky trade that could go extremely well or extremely bad. When analyzing Draftkings, the company will desperately need sports, and with COVID-19 around until at least early 2021 sports could further be affected.
On the otherhand, a vaccine and better tests have and are being made with sports starting to come back in many ways.
In short, I believe $DKNG is a risky investment in the short and mid-term but I like it long. If a vaccine does come to fruition I see large gains on the horizon, but if the opposite happens I think large losses are possible.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply opinion based on independent research.