Is Draftkings a buy?
It’s time to breakdown one of the most popular sports betting plays within the market. Here is the breakdown on $DKNG, otherwise known as Draftkings.
Current Price: $47.749
52/Wk High: $64.19
52/Wk Low: $10.04
Market Cap: $18.8 billion
Read below for the breakdown!
Draftkings is a major digital gaming and sports entertainment company, boasting an expansive platform that provides customers with fantasy sports betting opportunities, and much more.
While the online sports betting world was small at one point due to legal issues, it is no more, with roughly 75% of the United States legalizing or introducing online sports betting legislation according to Barrons.
Furthermore, the numbers continue to grow better for Draftkings both out of sheer market size and strong growth.
In fact, in a recent note from Piper Sandler, the online gaming and sports betting business could hit $40 billion in market value, leaving plenty of room for DraftKings to grow (barrons.com).
Not only is the market poised to grow, but Draftkings is capitalizing and already offers mobile sports betting in ten states, the most of anyone in the industry.
Digging into the numbers Draftkings delivered a Q3 miss, with an EPS of $-0.98 versus the analyst’s consensus estimate of $-0.61. On the otherhand, the company saw plenty of growth under the hood.
DraftKings reported a solid $133 million in revenues for Q3, representing 98% growth since the same time 2019 revenue level of $67 million.
Management also reiterated positivity, noting Monthly Unique Players (MUPs) for the B2C segment saw a 64% year over year increase throughout the third quarter.
On the downside, GAAP sales and marketing expenses did increase significantly in the third quarter to $203 million.
When it comes to guidance, Draftkings management raised FY 2020 revenue guidance to a range of $540 million to $560 million, representing a 25% to 30% growth range.
Company management also included FY 2021 guidance, and now expects revenues to land within a strong range of $750 million to $850 million, representing roughly 45% growth year on year.
The balance sheet is also quite impressive, boasting no debt and minimal liabilities.
Total Debt: None
Total Liabilities: $325 million
Total Assets: $2.516 billion
Cash & Short Term Inv: $1.376 billion
Taking in the numbers, the analysts are very bullish on Draftkings, with the mean price target currently sitting at $61.00/share, representing a 27.00% gain.
It is also important to note that Draftkings high price target is $100.00/share, representing a 108.20% gain, while the low price target is $39.00/share, representing a -18.80% loss.
On the downside, the big money is less involved with only 44.89% of Draftkings being institutionally owned. Top holders include The Vanguard Group, T. Rowe Price Associates, and Walt Disney Company.
On a technical basis, Draftkings isn’t looking bad. According to the six-month charts, the MACD is trending upward, within a range of 1.02 down to -0.05.
The six-month charts are also indicating an RSI of 58.86 and CCI of 101.48, both of which are on the high side. On the otherhand, Draftkings does trade a distant seventeen points off its highs.
The only core risk I currently foresee to the company is the pandemic, which looks to have an end date in mid-2021 due to recent vaccine progressions made by Phizer and Moderna.
Overall, the future looks extremely bright for Draftkings given the industry’s outlook, Draftking’s financial execution, and the company’s continued growth throughout a year boasting a huge set of challenges.
In short, I am bullish on Draftkings both short and long term and see it as a strong
buy at its current price.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.