As sports-betting legalization spreads across U.S. states, DraftKings (DKNG) is at the forefront of the sports-betting industry. Amid huge price moves since its April 2020 debut, is DKNG stock a buy right now?
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DraftKings stock surged 7% Tuesday after Morgan Stanley raised its price target from 22 to 23, while maintaining an overweight rating. The firm believes DKNG will achieve its first quarter of positive EBITDA this year with a sharp ramp up into 2024. Shares are already up 83% year to date in 2023.
Shares rallied 2% Wednesday, trading around 21.35.
First-quarter earnings results are due out May 4 before the stock market open. Wall Street expects the company to lose 84 cents per share on sales of $688.8 million.
DraftKings Fundamental Story
The expanding legalization of digital sports betting is an emerging trend. The November 2020 election results showed voters in several states largely approved ballot measures that legalized sports betting and other gaming expansion measures.
Boston, Mass.-headquartered DraftKings is primed to take advantage of this burgeoning shift in state attitudes toward sports betting. DraftKings is an online sports platform that allows users to play daily fantasy games and win cash prizes.
Sports-betting prospects look strong, with around 20% of U.S. adults saying they bet money on sports in some way in the last 12 months, according to a 2022 Pew Research Center survey. The American Gaming Association reports that commercial betting industry saw record revenue in 2022.
DraftKings is on the road to profitability. After losing $3.16 per share in 2022, the company is expected to lose $2.07 in 2023 and $1.01 in 2024, according to IBD data.
DraftKings Stock: Strong Revenue Growth
On Feb. 16, DKNG topped fourth-quarter estimates, reporting a smaller-than-expected loss. The company lost 53 cents per share vs. an 80-cent loss a year earlier. Meanwhile, DraftKings Q4 revenue grew 81% to $855 million.
On the year, DraftKings reported a loss of $3.16 per share as revenue grew 73% to $2.24 billion. Analysts see DraftKings revenue growth continuing, averaging an annual increase of 22% through 2026.
DraftKings IBD Stock Ratings
As a result of the company’s lack of profitability, DraftKings’ Earnings-Per-Share Rating is a weak 46 out of a best-possible 99. The EPS Rating measures a company’s ability to grow profits year over year, using the most recent two quarters and the past three-to-five years of earnings growth.
According to the IBD Stock Checkup, DKNG stock shows an improving 93 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.
DKNG Stock Technical Analysis
DKNG stock is already up more than 83% year to date in 2023. Shares are building the right side of a cup base that has a 21.72 buy point. Keep an eye out for a handle to offer a lower entry.
DraftKings stock is about 3% away from the latest entry, as its rebounds from its key 50-day moving average, according to IBD MarketSmith chart analysis.
Is DKNG Stock A Buy Right Now?
DraftKings stock is a promising long-term prospect in the sports-betting industry, and the company’s potential is encouraging. Despite a lack of earnings, the company has strong revenue growth and is one of the leaders in the online betting megatrend. Wait for DKNG stock to break out decisively past a new buy point. Since the stock is not above the buy point yet, it is not a buy right now.
For more leading stocks and stocks approaching buy points, check out these IBD Stock Lists, like the Stocks Near Buy Zones. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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