Gambling enthusiasts are enjoying the legalization of online gambling across the U.S. Online gambling is legal in six states at this time, but many only allow in-person betting. DraftKings (NASDAQ:DKNG) has significantly benefited from this move and became a hot pick in early 2021. However, the company could not sustain the growth and it showed through DKNG stock.
The stock that once hit $74 is down 62% in the past year and is trading around $19 today. DKNG stock has consistently fallen since September 2021 and is at a 52-week low now. The big upside prospects are nowhere close but the stock is at a low today and it could be a good bet to take your position. Let’s take a look at the factors that can push the stock higher.
DKNG Is Expanding Across States
DraftKings is leaving no stone unturned to expand into new states and attract more users. This certainly leads to a rise in revenue growth. Gambling enthusiasts no longer need to travel for long hours to different locations to enjoy their favorite activity. With several states legalizing online gambling, it has become easier for people to gamble and DraftKings is trying to make the most of it.
It is expanding into more and more states, recently adding Arizona, Connecticut, and Wyoming to the list of states to which it caters. Hence, the total number of states where DraftKings provides services is now 15.
It is expanding aggressively across new markets to acquire customers. While this has led to a rise in the number of users, it has also led to an increase in losses, which has the investors concerned. I believe this loss could be temporary. When the company enters a new market, it has to incur high expenses for advertising and marketing and it affects the bottom line. But once the expansion activities are complete, DKNG will have an opportunity to cash in on the growing number of users while reducing the losses.
The Revenue Is Also Growing
If you look at the revenue growth of the company, it is nothing but impressive. The revenue went from growing at 17.9% in 2018 to 42.9% in 2019 and 90% in 2020. The management expects to deliver 96% revenue growth for 2021 ranging between $1.24 billion and $1.28 billion. It also expects 2022 revenue between $1.7 billion to $1.9 billion.
Most importantly, the monthly paying users are also increasing, which means the company is consistently attracting new users to the platform. As long as it continues to attract paying users, it will continue to generate revenue.
The company recently launched mobile sports betting in New York and it is expected to bring $1 billion in gaming revenue annually. The move to New York could help the company boost revenue significantly in 2022.
The Bottom Line on DKNG Stock
The stock price is consistently falling due to several reasons, including the massive losses. If you trust the business model, DKNG stock is a good pick for the long-term. The company has a solid gaming business model and accelerating revenue growth which positions it well in the industry.
DKNG stock continues to remain a favorite of Cathie Wood’s ARK Investment, which recently purchased 266K shares. The company was once a darling of the market, but excessive selling pressure has led to a major dip in the stock.
But this is not the end. DKNG has a long way to go and the future looks bright. It has already provided multi-bagger returns to investors and could do so again.
However, if you are a conservative investor, it is best to sit aside and watch where the stock goes from here.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.
