DraftKings (DKNG) -) shares may have lost a lot of ground in 2022, but they’re big winners this year.
The company's stock has nearly tripled from its December lows, partly because of better-than-hoped financials, including a surprising profit last quarter as more people flocked to online sports gambling.
Can DraftKings stock continue climbing, or has it put in its highs for this year?
DraftKings Beats Analysts' Bets
The stock market tumble caused DraftKings stock to fall 85% from its peak in early 2021 into last December, but it didn’t stop sports fans from betting on their favorite teams.
While recession worries may have derailed demand in some industries, the jobs market remains healthy, and wages continue to increase, providing plenty of discretionary income for sports gambling. DraftKings' year-over-year revenue growth totals 136%, 81%, 84%, and 88% over the past four quarters.
The company’s second-quarter performance was particularly noteworthy because it marked the first quarter during which DraftKings turned a profit. It earned 14 cents a share in the quarter, trouncing the 14-cents-a-share loss that Wall Street analysts expected.
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DraftKings' $875 million quarterly revenue was driven by a 44% increase in monthly unique players and a 33% increase in average player revenue. The combination of more players generating more revenue prompted management to estimate that fiscal year 2023 revenue would range $3.46 billion to $3.54 billion, ahead of Wall Street’s $3.27 billion target.
The company's bullish outlook is supported by its decision to offer more gambling products online, or iGaming, including virtual casinos like Golden Nugget Online Gaming.
It also aims to launch DraftKings sportsbook in Kentucky in September, which could help drive additional sports gambling during the upcoming NFL and college football seasons.
DraftKings Nets a Surprising New Price Target
DraftKings guidance will likely cause analysts to boost their full-year sales and earnings targets, but they’re not the only optimistic ones.
Real Money technical analyst Bruce Kamich has been analyzing price charts and setting price targets for 50 years. Recently, he reviewed DraftKings charts for clues to what might happen to its stock next. Kamich came away optimistic.
“Prices are in a longer-term rising phase as they trade above the positively sloped 40-week moving average line. The weekly OBV [on-balance volume] line shows important strength from May 2022. The MACD oscillator [moving average convergence divergence] is bullish, too,” says Kamich.
On balance volume tracks up minus down day volume. MACD is a momentum indicator. It’s bullish when the 12-day exponential moving average exceeds the 26-day EMA, resulting in a reading above zero.
The bullish backdrop has Kamich thinking that DraftKings stock could continue to rally. He came up with a $43 price target using daily point-and-figure charts. That represents a 34% return from here.
That’s encouraging, but what’s likely to really catch investors’ attention is his $61 price target using weekly charts, a 90% return.
Given those potential price targets, Kamich unsurprisingly recommends sticking with DraftKings shares.
What would make him change his mind? He advises investors to protect against downside risk by placing a stop-loss order below $26.50. If it trades below that level, Kamich thinks it best to move on to other stock ideas.
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