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: $49.78

52/Wk High: $64.19

52/Wk Low: $10.60

Market Cap: $19.5 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.

With the growing legalizations across the country of online sports betting major states and cities such as New York seem to be on the path to legalization.

In recent news, New York Governor Andrew Cuomo announced that he will back sports betting legislation, which will make online sports betting legal throughout the state of New York.

This is a big win for companies such as Draft Kings and Penn National, given that it would open another massive market to the companies.

According to the latest data, Draftkings is a market leader in five of the twelve states that have legalized online sports betting. It is important to note that Draftkings lead is greater than any competitor currently in the market.

Not only is the market poised to grow, but Draftkings is capitalizing and already offers mobile sports betting in twelve 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: $572 million

Total Assets: $2.567 billion

Cash & Short Term Inv: $1.398 billion

When it comes to valuation DraftKings is quite expensive.

Price to Sales: 65.66x

Price to Book: 18.43x

While DraftKings is a solid company, management has some work to do.

Return on Equity: -48.48%

Return on Assets: -38.88%

Return on Invested Capital: -47.01%

Taking in the numbers, the analysts are very bullish on Draftkings, with the mean price target currently sitting at $63.41/share, representing a 27.55% gain.

It is also important to note that Draftkings high price target is $100.00/share, representing a 101.45% gain, while the low price target is $39.00/share, representing a -21.43% loss.

The big money on the otherhand is quite uninvolved with 45.08% of DraftKings being owned by institutions. Top holders include The Vanguard Group, T. Rowe Price Associates, and the Walt Disney Company.

As for the technicals, DraftKings could be flashing opportunity. According to the six-month charts, the MACD is moving to the downside with significant momentum within a range of 0.37 down to -0.16.

The six-month charts are also indicating an RSI of 51.11 and CCI of -22.83, both of which are on the lower end.

In short, DraftKings is a solid pick to get in on the online sports betting boom, given leadership in a majority of states, further legalization across the country, and large market growth.

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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.