Is it Time to Go "all in" on DraftKings?

Taking a deeper look at DKNG since its April IPO

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DraftKings, Inc. (NASDAQ: DKNG -- $53.11) is a fantasy sports and online gambling platform based out of Boston. Lately, the company has had the media spotlight as news drops about new partnerships with huge franchises like the New York Giants, the New England Patriots, and the Dallas Cowboys. DraftKings also announced that Hall-of-Fame basketball legend, Michael Jordan, became a major investor and advisor to the company earlier this month. These PR power plays have certainly served as a catalyst for the 46% growth the stock has experienced over the past month.

DraftKings (DKNG) has piqued investor interest as the company is uniquely positioned in an industry with the potential to surge. Many see opportunity in DraftKings' leading brand and market share in the fantasy sports space, and are predicting a "potentially massive" and growing addressable market from online sports betting and iGaming state legalization. Although the opportunity is undoubtedly present, DraftKings’ ability to sustain long-term growth will is susceptible to a lot of external factors.

Similar to companies competing in the cannabis industry, DraftKings is currently facing significant legal hurdles that could impede its growth. Although recent trends in U.S. legislation may suggest future changes in relaxing current gambling laws, nothing tangible has come to fruition yet.

Further, DraftKings has not fared well year-to-date as the coronavirus pandemic continues. The worldwide cancellation of major sporting events forced the company to issue refunds and the ongoing shutdowns have limited the company's ability to sustain growth.

DraftKings, Inc. (DKNG) had its initial public offering earlier this year and has only reported earnings for first quarter and second quarter so far in 2020. The company went 0 for 2 on their quarterly revenue reports, missing earnings expectations for both quarters. In the first quarter of 2020, DraftKings missed earnings expectations by 50%, reporting an EPS (earnings per share) of -0.24 instead of the expected -0.16. In the second quarter of 2020, DraftKings missed earnings by 100%, reporting an EPS of -0.55 instead of the expected -0.19.

Despite its underwhelming earnings reports since going public, DraftKings (DKNG) has a promising balance sheet with $2.5 billion in assets and only $3.25 million in liabilities. DKNG boasts an impressive year-to-date rise of 386.9%, with support emerging at the shares' ascending 80-day moving average. The company has a reported $2.2 billion in equity at this time.

Overall, DraftKings (DKNG) is in a position like no other public company. It is currently the only U.S.-based sports betting platform publicly traded on the U.S. markets, which could be major support for the stock's growth while the company dominates this space without competition.

As always, Schaeffer's recommends looking to the options pits for opportunities in the short-term movement of DKNG. As for a long-term investment, the 46.54%stock growth in the past month alone indicates investors are looking beyond the current obstacles DraftKings faces, and focusing on the company's long-term potential upside. There is still optimism about earnings reports for Q3 and beyond. The upside for this company in the long-term could potentially be a double up on its current stock price or exponentially more.


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