The stock is down in part because growth stocks are falling as interest rates rise, but investors also haven't been pleased with DraftKings' very aggressive acquisition strategy. An offer to Entain (LSE: ENT) for $22 billion, more than DraftKings' valuation today, has caused the latest consternation for investors.
Why is DraftKings stock down 25% in recent weeks?
Shares of DraftKings ( DKNG 6.53%) have fallen 35% from their all-time high earlier this year, and are down over 25% in the last few weeks alone. The stock is down in part because growth stocks are falling as interest rates rise, but investors also haven't been pleased with DraftKings' very aggressive acquisition strategy.
Did DraftKings buy Entain for $22 billion?
DraftKings did that when it agreed to acquire Golden Nugget Online Gaming (NASDAQ: GNOG) for $1.56 billion in stock. We don't know exactly the terms that DraftKings offered for Entain, but given that the offer was for $22 billion, it's safe to say a large percentage of the offer was in the form of stock.
Will DraftKings continue to draw support from Cathie wood?
While the stock is off 82% from its all-time high in 2021, Draftkings continues to draw support from famed investor Cathie Wood. Wood purchased 103,268 shares of Draftkings on Monday, May 9 for the Ark Fintech Innovation ETF, according to arkinvestdailytrades.com.
What's happening with dnkg stock?
The big news beating up DNKG stock today is its Adjusted EBITDA guidance for 2022. This has it expecting losses between $825 million and $925 million. For comparison, adjusted EBITDA in 2021 was $676.13 million.
Is DraftKings a good long term stock?
Although revenues over the past year have been rising, the company is still operating at a loss, making DraftKings stock a speculative bet for investors. Additionally, a general market rotation into value stocks over high-flying growth stocks has punished DraftKings shares over the second half of 2021 and early 2022.
Is Draftking stock a buy?
' That's Why It's a Buy, Analyst Says. As online sports betting continues to gain traction in new state markets, it may be time to revisit DraftKings, said Jefferies analyst David Katz.
Will DraftKings stock recover?
The 27 analysts offering 12-month price forecasts for DraftKings Inc have a median target of 25.00, with a high estimate of 60.00 and a low estimate of 13.00. The median estimate represents a +93.95% increase from the last price of 12.89.
Is DraftKings losing money?
DraftKings lost $326 million in the fourth quarter, and had fewer users than expected. The loss came despite healthy growth in the top line in the last three months of 2021, with sales rising 47 percent to $473 million. The Super Bowl ad blitz is expected to further bolster legalized sports betting.
What's happening to DraftKings?
DraftKings stock is sinking after earnings. That forecast, however, was overshadowed by a wider-than-expected projected loss in 2022 as competition in online sports gambling intensifies. DraftKings shares (ticker: DKNG) were down 14.5%, to $18.86, in morning trading on Friday.
Is DraftKings hold or sell?
The DraftKings, Inc. stock holds a buy signal from the short-term moving average; at the same time, however, the long-term average holds a general sell signal. Since the longterm average is above the short-term average there is a general sell signal in the stock giving a more negative forecast for the stock.
Who owns the most DraftKings stock?
The Vanguard Group, Inc.Top 10 Owners of DraftKings IncStockholderStakeShares ownedThe Vanguard Group, Inc.6.15%26,914,343ARK Investment Management LLC5.35%23,416,465Nikko Asset Management Co., Ltd.3.23%14,142,028Nikko Asset Management Americas, ...3.05%13,326,1476 more rows
How much will DraftKings stock be worth?
Stock Quote (U.S.: Nasdaq) | MarketWatch....$ 12.34.CloseChgChg %$12.230.625.34%
Can DraftKings be profitable?
Despite a hefty 51% tax on online gross gaming revenue from mobile sports betting in New York, DraftKings still intends to turn a profit within a three-year period.
Can DraftKings go out of business?
Though more than 30 states have legalized sports wagering, you likely won't be able to bet on your phones in California until 2023 at the earliest, and the return of mobile betting in Florida is uncertain.
NASDAQ: DKNG
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DraftKings is trying to use its stock to acquire the competition, which will be tougher as the stock falls
Shares of DraftKings ( DKNG -0.28% ) have fallen 35% from their all-time high earlier this year, and are down over 25% in the last few weeks alone. The stock is down in part because growth stocks are falling as interest rates rise, but investors also haven't been pleased with DraftKings' very aggressive acquisition strategy.
A growth machine
DraftKings is absolutely a growth machine. The company grew revenue 73% in the past year, and expects to generate $1.21 billion to $1.29 billion in revenue this year.
NASDAQ: DKNG
Revenue growth doesn't come without a price, though. You can see above that the company also burned $425 million in cash over the past year, and that cash burn rate is growing as DraftKings spends on sales and marketing and expansion into new territories.
DraftKings' stock price is important
The falling stock price is important for a couple of reasons. First, stock sales can be used to fund organic growth initiatives, like spending on sales and marketing, as DraftKings has been doing. Given the cash burn rate above, DraftKings could use stock sales to fund further growth as more states open up sports betting and iGaming.
Confidence in DraftKings is key
Investor confidence in a company like DraftKings is key for the company long-term, because it allows management to grow and acquire competitors without having to worry about being profitable or cash-flow positive. The stock can be a piggy bank to be used when needed.
DraftKings is on a slippery slope
Despite being a major player in online gambling in the U.S., DraftKings needs to perform flawlessly and keep investor confidence to reach its potential. After the Entain offer, we're starting to see some cracks in the company's acquisition strategy and the stock is falling as a result.
DKNG Stock Is Hitting Bottom
If you bought today and the current analyst median target price comes to fruition by the end of 2022, investors are looking at almost 89% upside. That’s a pretty healthy one-year return.
The Bottom Line
I believe DraftKings has a strong brand. The addition of Golden Nugget Online Gaming will undoubtedly help bring some balance to a business driven primarily by sports betting. Using stock to buy GNOG, I think GNOG investors will be happy long-term with the decision to sell to DraftKings.
Plagued by Excess Competition
When DraftKings went public, it was viewed as an easy way for investors to get exposure to sports betting. At the time, there weren’t very many online sports gambling sites in the U.S. And DraftKings and Penn National Gaming (NASDAQ: PENN) were the sector’s two main publicly traded stocks.
Gaming Is a Five-to-Ten Year Turf War
DraftKings isn’t too worried about its 2021 or 2022 financial results. Of course, every publicly-traded company wants to beat analysts’ average estimates each quarter. But the focus of online gambling companies is on gaining market share.
Investors Want Profits Today, Not In 2027
If DraftKings makes the correct moves, it, FanDuel and maybe one or two more gaming companies should dominate the sports betting market by the end of this decade. It’s simply not feasible for more than 12 companies to all advertise and deal with the sector’s risks and compliance issues across dozens of different states.
The Verdict on DKNG Stock
Over the past 12 months, DraftKings produced $1.1 billion of revenue and turned that into $445 million of gross profit. That’s not bad in theory. However, the company had $1.6 billion of sales, general and administrative (SG&A) costs over the same period. Most of that was spent on marketing which was used to get and retain customers.
This high-flying stock is having a big pullback today
Travis Hoium has been writing for fool.com since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things. Follow @TravisHoium
What happened
Shares of DraftKings ( NASDAQ:DKNG) plunged as much as 8.9% in trading Thursday as a pullback in gambling stocks continued. At 12:50 p.m. EDT shares were still down 4.9% on the day.
So what
The biggest news of the day was that 1.5 million people filed for unemployment last week, worse than analysts were expecting. As that happened, COVID-19 cases were increasing in many southern states that had light outbreaks in the spring. This could lead to a slower economic recovery if people stay home in those areas.
Now what
I don't think the long-term prospects for DraftKings as a growth stock have changed at all today, and rough economic times may make more states likely to open online gambling. What I would worry more about is small operations and insiders selling a massive block of shares just last week.
Operating Expenses Are Going in the Right Direction
DraftKings recently reported fourth-quarter revenue at $473 million which beat analyst expectations. It suffered a loss of 35 cents per share and had a negative adjusted EBITDA of $128 million. The company is not profitable yet and the losses are piling up as the competition in the industry continues to grow.
Bottom Line on DKNG Stock
DraftKings is looking to expand its business but this also means it will have to spend more money. DraftKings is also fighting a tough battle for market share and the competition is only going to intensify in the coming years.
