DraftKings is the IBD Stock Of The Day for Wednesday. DraftKings stock has soared 167% so far this year, driven by a spike in gamblers hoping to strike it big as legal sports betting expands. Shares flirted with a buy signal Wednesday.
Some form of sports betting is legal in 38 states and Washington, D.C., according to the American Gaming Association, up from 30 jurisdictions in 2021. Meanwhile, U.S. sportsbook revenue leapt 75% to a record $7.5 billion in 2022 as Americans bet $93.2 billion on sports throughout the year.
DraftKings operates in 24 states where sports betting is legal — as well as in Ontario, Canada and Puerto Rico — after launching its mobile sportsbook in Kentucky in late September.
The company reached a market access agreement with ECL Corbin, a subsidiary of ECL Entertainment in August. ECL Corbin runs the casino property at the Mint Gaming Hall at Cumberland and Cumberland Run. DraftKings also opened retail sportsbooks at both properties.
Its daily fantasy sports product is available in 44 states, certain Canadian provinces and the U.K. Meanwhile, the company's iGaming product operates in five states and Ontario under the DraftKings brand, as well as in four states under its Golden Nugget Online Gaming brand.
Meanwhile, DraftKings' userbase is exploding. Monthly unique players (MPUs) leapt 44% to 2.1 million customers for its Q2 earnings beat in August. The Boston, Mass.-based company posted its first adjusted quarterly profit as revenue leapt 88% to $875 million. That was the second straight quarter of accelerating top-line growth.
DraftKings lifted its guidance on the results and expects as much as 58% revenue growth for the year.
FactSet analysts project full-year earnings per share to improve to an adjusted loss of $1.09 from a loss of $1.53 in 2022. Revenue is seen increasing 57% to $3.53 billion.
Analysts Outlooks
JPMorgan upgraded DraftKings stock to an overweight rating on Sept. 26 and hoisted its price target to 36 from 26. Gambling continues to be "an appealing sector," analyst Joseph Greff wrote in a research note, "with attractive same-store and new market growth prospects, against the backdrop of an industrywide improving operating expense control environment."
Further, Greff believes DraftKings has a "strong moat" that should allow it to compete against new names like ESPN Bet, which is licensed to Penn Entertainment, and Fanatics, similar to how it competed against Caesars, according to the note.
Meanwhile, DraftKings' declining customer acquisition costs bode well for the company's long-term growth, Argus wrote in a Sept. 28 research note. Argus forecasts revenue to jump to $3.2 billion in 2023 from $2.2 billion in 2022 on the wave of online legal sports betting in additional states. The firm maintained a buy rating and 34 price target on DraftKings stock.
Cathie Wood, ARK Invest Cash In
Cathie Wood's ARK Invest management firm appeared to steadily take profits throughout September. ARK Invest sold a total of 1,586,736 DraftKings shares across its ARK Innovation ETF, ARK Next Generation Internet ETF and ARK Fintech Innovation ETF on seven different occasions starting Sept. 11, according to daily trade updates. The firm made about $48.44 million on the DKNG stock sales, based on the various closing prices throughout the month.
ARK sold an additional 52,565 shares from the ARKW fund on Oct. 10, worth $1.59 million based on the $30.27 closing price.
Wood's firm still holds 9,726,021 shares of DKNG in ARKK, worth more than $294.4 million and representing 4.2% of the fund as of Oct. 11.
ARKW holds 1,751,250 shares of DraftKings as of Oct. 11, worth roughly $53 million and 4.14% of the total fund. ARK holds 1,977,836 shares in the ARKF ETF, worth roughly $59.87 million and representing 7.16% of the total fund.
DraftKings Stock
DraftKings stock is a member of the IBD 50 List and Leaderboard Watchlist. It ranks second in the Leisure-Gaming/Equipment Group, according to the IBD Stock Checkup.
DKNG stock is building a consolidation with an official buy point of 34.49. Shares tumbled from highs in August, in part on the ESPN-Penn alliance. But shares have bounced back from Aug. 18, with some bumps along the way.
DKNG stock retook its 50-day moving average last Friday. On Wednesday, shares flirted with a downward-sloping trendline but backed off along with the broader market. Investors could use Wednesday's high of 31.10 as a trigger point, still close to the 50-day. Investors also could use 32.65 as another early entry.
DraftKings' relative strength line is near 52-week highs, reflecting DKNG stock's strong outperformance vs. the S&P 500 index. DKNG has a near-perfect 98 RS Rating. DraftKings has a solid 85 Composite Rating, which combines various technical indicators into one easy-to-read score. Shares have a 67 EPS Rating as DraftKings works toward profitability.
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