DraftKings stock is eyeing a new buy point. Is it time to place a bet?
DraftKings (DKNG), Tuesday’s pick for IBD 50 Growth Stocks To Watch, is a fantasy and sports betting platform that operates in 23 states where sports betting is legal, as well as Ontario, Canada and Puerto Rico. Currently, 34 states and Washington, D.C., allow some form of legal sports betting, according to the American Gaming Association.
Four more states — Maine, Vermont, Kentucky and Florida — legalized sports betting as of late June but have yet to officially launch.
On Aug. 3, DraftKings reported its first profitable quarter as revenue growth accelerated to 88% in Q2 from 81% and 84% the prior two quarters. The company earned 14 cents per share compared with a 29-cent loss in the year-ago period. DraftKings stock surged nearly 6% in response.
“We are acquiring new customers efficiently while simultaneously retaining and monetizing our existing players through rapid product innovation, less promotions, and higher hold from better bet mix,” CFO Jason Park said of the results. “Our unit economics are outstanding with older states generating more than enough cash to fund investment in new states.”
DraftKings Stock’s IBD Ratings
While the company is not expected to have a profitable year, DraftKings boasts a strong track record of big revenue growth. Due to that unprofitability, DraftKings stock shows a mild 67 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years. The two most recent quarters are weighted more heavily.
DraftKings stock displays a not-so-great 88 IBD Composite Rating, with mediocre long-term fundamentals coinciding with strong stock-price performance since December 2022.
DraftKings Stock: One Of Best Stocks To Buy And Watch
DraftKings stock is building a cup with handle that has a 32.65 buy point, per IBD MarketSmith pattern recognition. Shares dropped nearly 4% midday Tuesday, still holding above support around their 50-day moving average, a key level to watch.
Bullishly, the relative strength line hit a new high in recent weeks, a sign of big outperformance vs. the S&P 500. The RS line measures a stock’s price performance vs. the S&P 500 and is the blue line plotted on every IBD chart.
Improving fundamentals, along with bullish gains in recent weeks, make DraftKings stock one of the best stocks to watch in today’s stock market.
However, the stock market outlook remains under pressure, with a 20%-40% recommended exposure range, per IBD’s The Big Picture. That means that investors should be mostly playing defense until the market outlook improves.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks are among the best stocks to buy and watch.
Source: IBD Data As Of Sept. 19, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
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