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DraftKings, Stock of the Day, breaks key level after flirting with buy signal

DesignKings

DesignKings

DKNG


$1.92



4.27%



5%

IBD Stock Analysis

  • Wednesday’s high of 45.69 would be an early entry
  • But the shares fall below the 50-day limit
  • Income within two weeks

Composite review

Industry group rankings

Emerging pattern

Pull back

* No real-time data. All data shown was captured at 2:31 PM EDT on 04/17/2024.

DraftKings is the IBD stock of the day. DKNG plunged below a key moving average on Wednesday, continuing its recent pullback. But shares could stage a recovery after flirting with a buy signal.




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Based in Boston DesignKings (DKNG) is a member of the IBD 50 list. DKNG shares are up more than 22% so far this year as legal sports betting continues to grow.

Data from the American Gaming Association shows that sports betting is live and legal in 38 states and Washington, D.C., following the March 11 launch of online sportsbooks in North Carolina.

Meanwhile, commercial sportsbooks generated $827 million in revenue across 31 U.S. jurisdictions in February, AGA reported. That represents an increase of 22.3% from February 2023, when sports betting markets were active in 30 jurisdictions.

Americans wagered $10.49 billion on sports this month, an increase of 24.8% year over year. And year-to-date, commercial sports betting revenues are up 32.1% to $2.31 billion.

In 2023, sportsbook revenues rose 44.5% to a record $10.9 billion. Total sportsbook charter rose 27.8% to $119.8 billion for the year, also a record. Handles refer to the total amount that sportsbooks and casinos accept from gamblers.

DraftKings, which currently operates in 27 states and Ontario, Canada, is reporting fourth-quarter earnings on Feb. 16, which showed adjusted earnings improving to 29 cents per share, compared to a loss of 14 cents the year before. However, revenue growth slowed for the second quarter in a row, down 43% to a record $1.23 billion.

DraftKings reports first-quarter results on May 2. Analysts expect DraftKings to report an adjusted loss of 17 cents per share, compared to a profit of 14 cents per share last year. Wall Street predicts a 45% increase in sales to $1.12 billion.

Goldman Sachs initiated coverage of DraftKings shares on Wednesday with a buy rating and a price target of 60, implying an upside of about 36% from current levels. The company expects DraftKings to grow revenue by 20% or more as the company benefits from “healthy growth” in existing states and future legalizations for online sports betting and Internet gaming.

Sports betting scandals

Meanwhile, the NCAA and professional leagues are trying to address the gambling problems surrounding their respective sports.

The NCAA said in late March that it wants to ban prop betting in college sports, prompting DKNG Flutter entertainment (FLUT), owner of rival FanDuel, collapsed.

Prop bets, or proposition bets, are bets on individual statistics that are not related to the final score. Examples include how many rebounds a basketball player collects in a game or how many yards a quarterback throws.

“The NCAA draws the line at sports betting to protect student athletes and protect the integrity of the game,” NCAA President Charlie Baker said in a statement. As a result, “the NCAA has worked with states to address these threats and many are responding by banning college betting,” the statement added.

And Major League Baseball is dealing with a massive gambling scandal after it was discovered that the now-former translator of Los Angeles Dodgers superstar Shohei Ohtani stole $16 million to gamble.

The NBA on Wednesday issued a lifetime ban to Raptors power forward Jontay Porter for gambling violations.

Elsewhere, federal lawmakers are beginning to scrutinize online gambling’s targeting of big spenders and VIPs amid growing concerns about gambling addiction, the Wall Street Journal reported in late March.

Senator Richard Blumenthal sent letters last week to eight online gambling companies, including DraftKings and Flutter Entertainment. The letter urged them to stop using player data and other marketing tactics to target customers with gambling problems.

Meanwhile, Rep. Paul Tonko is seeking to impose federal oversight of online sports betting in every state that has legalized the business, the report said.

DraftKings Stocks

DraftKings leads the Leisure-Gaming/Equipment industry group, according to IBD Stock Checkup.

DKNG has flirted with a trendline entry on top of an earlier short consolidation, as shares pulled back from their late March highs.

But shares turned around, falling more than 4% on Wednesday and falling below their 50-day moving average after testing the line in early trading.

A rise above Wednesday’s high of 45.69 could provide a buying point. But shares need to stay above that level, and investors will be eager to see the broader market improve.

DraftKings may be starting to form a new foundation, but it will take more time.

DKNG stock has a Composite Rating of 90 out of a possible 99. The Composite Rating combines several technical indicators into one easy-to-read score. DraftKings has an EPS Rating of 69. The stock’s relative strength line is near its 52-week high with a near-perfect RS Rating of 96.

You can follow Harrison Miller for more stock market news and updates on X/Twitter @IBD_Harrison

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