Raised Fiscal Guidance Gives the All-Clear for DraftKings Shares

While investors in online sports betting platform DraftKings (NASDAQ:DKNG) have generally done well this year, there have been ups and downs. It has been a real roller coaster ride for long-term holders of DKNG stock.

DraftKings (DKNG) logo on a phone
Source: Lori Butcher / Shutterstock.com

DraftKings is an interesting company for traders because it’s involved in both e-gaming and sports betting. The e-gaming market can thrive even when people are stuck at home during a global pandemic.

On the other hand, the sports betting niche depends heavily on a full sports calendar, which won’t happen during a period of widespread lockdowns. So, the persistence of the novel coronavirus pandemic has created volatility in the DKNG stock price.

If you can handle the prospect of further volatility in the share price, then encouraging fiscal data should convince you that the endpoint will be new all-time highs for DKNG sooner or later.

A Closer Look at DKNG Stock

Just to show you how much this stock can move, consider that DKNG stock’s 52-week range is from $10.06 to $64.19. In other words, this stock has moved more than 600% during the past year.

The short-term peak occurred in early October. After that, DKNG stock corrected sharply. On Nov. 10, when DKNG was trading at around $40, I recommended that people should take a small long position.

That turned out to be a good call as DKNG stock reached $52.75 on Nov. 27. This, however, begs the question of whether it makes sense to own DKNG shares at a higher price point.

Keep in mind that there’s still room for DKNG stock to run as the previous high mark was in the mid-$60s. And given the company’s impressive financial stats, there’s no reason why the DKNG bulls shouldn’t be able to attain fresh highs.

Guidance Is the Key

I will be the first commentator to admit that DraftKings’ third-quarter fiscal data offered a mixed picture. For instance, analysts had predicted a quarterly earnings loss of 63 cents per share. The actual result turned out to be a net loss of 98 cents a share. But then, the adjusted per-share loss was actually 57 cents.

As far as third-quarter revenue was concerned, Wall Street modeled $132.2 million. The actual result was $132.84 million, which was basically in line with the expectations. Yet, it’s also a 98% improvement over the year-ago period.

Furthermore, DraftKings reached a milestone in the third quarter as the company exceeded 1 million monthly unique users. That represents a 64% increase compared to the comparable quarter of the previous earlier.

I saved the best part for last, however. DKNG stock traders should know that DraftKings hiked its full-year revenue guidance from a range of $500 million to $540 million, to a range of $540 million to $560 million.

It Only Gets Better

If you thought that those numbers were impressive, check this out. For 2021, DraftKings expects revenue of $750 million to $850 million. At the same time, Wall Street made a prediction of $780 million in revenue for 2021.

Thus, whether you’re following the company or the analysts, it’s evident that there are high hopes for DraftKings going forward. Clearly, the opening up of the professional sports calendar was a contributing factor and will continue to provide a tailwind to DraftKings.

DraftKings CEO Jason Robins seemed to allude to this factor when he said, “The resumption of major sports such as the NBA, MLB and the NHL in the third quarter, as well as the start of the NFL season, generated tremendous customer engagement.”

Since DraftKings’ business model depends on online sports wagering, 2021 could turn out to be a blockbuster year for the company as the roster of professional sports events expands.

The Bottom Line

I previously advised a small long position in DKNG stock, and I’m making the same call today.

Wall Street analysts and the company are both expecting a strong 2021 for DraftKings. As the professional sporting events resume, DKNG stock bulls should be able to take the ball and run with it.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2020/12/raised-fiscal-guidance-gives-the-all-clear-for-dkng-stock-draftkings/.

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