Draftkings Stock Brushes Off Post-Earnings Bear Notes

DKNG is down more than 71% year-over-year

Digital Content Manager
Feb 22, 2022 at 10:30 AM
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Draftkings Inc (NASDAQ:DKNGis up 2.6% at $17.74 this morning, bouncing back from some of the losses that followed its fourth-quarter earnings and revenue beat on Friday. What weighed on the gambling concern was a disappointing 2022 outlook, with losses before interest, taxes, depreciation, and amortization expected to range between $825 and $925 million -- much worse than the $550.1 million analysts anticipated -- amid higher operating expenses.

Analysts have been chiming in with bear notes since the results first rolled in, with at least 10 brokerages slashing their price targets. Earlier today, Wells Fargo downgraded the security to "equal weight" from "overweight," while lowering its price objective to $19 from $41, noting concerns around profitability.

Short sellers have been piling on the stock, too. Short interest rose 19.9% in the most recent reporting period, and the 44.54 million shares sold short now make up 11.9% of DKNG's available float.

Options traders echo that pessimism. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Draftkings stock sports a 50-day put/call volume ratio that sits higher than 98% of readings from the last year. This means that while calls are outnumbering puts on an absolute basis, the latter have been getting picked up at a much quicker-than-usual clip. 

Drilling down to today's options activity, 23,000 calls and 27,000 puts have crossed the tape so far, which is double the intraday average. The most popular contract is the 2/25 15-strike put, followed by the April 30 put.

It's worth noting the stock's Schaeffer's Volatility Scorecard (SVS) stands at 83 out of 100, meaning the equity has exceeded option traders' volatility expectations during the past year.

Draftkings stock is looking to snap a three-day losing streak today, after falling to a fresh, roughly two-year low earlier. Shares shed 21.6% on Friday -- their worst daily percentage drop since March 2020 -- and have slipped back below their 20-day moving average. Longer term, DKNG is down 71.4% year-over-year. 

 

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