DraftKings Stock Cools as Earnings Loom

The equity is cooling from this month's record peak

Deputy Editor
Feb 25, 2021 at 12:57 PM
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It's no secret that sports gambling stocks have been a hot commodity of late, and online sports and gaming name DraftKings Inc (NASDAQ:DKNG) is no exception. The equity initially rose during today's trading, though it was last seen down 2% to trade at $59.09. DraftKings just announced MLB legend Cal Ripken Jr. as a special advisor to the board of directors. What's more, the company's fourth-quarter earnings report is slated for release before markets open tomorrow, Friday, Feb. 26. Below, we'll dive into DKNG's technical setup, and why investors might want to remain optimistic given the company's past reactions to earnings releases.

The security has climbed the charts at an impressive rate despite the pandemic threatening the viability of professional sports leagues around the globe. In fact, Feb 8. saw DKNG soar past the $64 level -- an area of resistance on the charts since October -- to notch a record high of $64.78. Though it's pulled back slightly, the 30-day moving average is still providing support, and longer term DraftKings stock is up 251.3% year-over-year.

DKNG Chart 2 February 25

The brokerage bunch is bullish on the equity. Of the 23 in coverage, 16 rate the stock a "buy" or better, while seven recommend a tepid "hold" or worse. Plus, the 12-month consensus target price of $63.60 is an 8.1% premium to current levels.

Ahead of the event, the options pits are pricing in a post-earnings swing of 11%, regardless of direction, which is slightly higher than the 8.4% move averaged during the company's last three quarters. As the company is still a relatively new publicly traded entity, there's not as many post-earnings moves to survey; still, two of these reports were positive, including a 15.5% pop last May and a 3.9% move higher back in November. 

Lastly, for those looking to weigh in on the DraftKings stock, options look like a good bet. The security's Schaeffer's Volatility Index (SVI) of 80% sits in the low 8th percentile of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. Further, the equity's Schaeffer's Volatility Scorecard (SVS) stands at a whopping 96 out of 100, meaning the stock has greatly exceeded option traders' volatility expectations during the past year -- a boon for options buyers.

 

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