It has been a wild ride for Draftkings stock (NASDAQ:DKNG) since its IPO, to say the least. There were very high hopes for the company since the SPAC format launch in late 2019. Those hopes were temporarily crushed upon news that the global economy, particularly the sports industry, was to shut down as a result of the coronavirus pandemic. At the time DKNG was pumping heavy, rising about 100% from the SPAC price to $19.50, before sharply falling about 50% in March. Since then, the stock has risen about 600% to the all time high of $64 and sold off again. Currently, we are seeing stabilization in the $40 range as investors await to hear news of the company’s earnings. DraftKings is expected to report Q3 2020 results on Nov 13 before market open. Here’s what to expect for DraftKings Stock Earnings tomorrow.
What to Expect
Thankfully, much of the world is starting to recover, economically speaking, from the extraordinary and unprecedented shutdown of the global economy. DraftKings’ Q3 earnings results are widely expected to benefit from the resumption of sporting events.
However, assumptions are not always the best investing advice, and when too many people are on one side, it usually does not end well.
So what can you expect from the earnings report tomorrow?
Check out this well written article from The Motley Fool on the subject here. The author writes:
Investors will first want to look at the company’s overall revenue growth. In the most recent quarter, it was 25%, which is quite impressive given how much the coronavirus pandemic plagued sports leagues. Assuming no major sports cancellations, the company expects to grow revenue by 30% at the midpoint for the second half of fiscal 2020. The NBA and MLB were already able to complete their seasons and crown the Los Angeles Lakers and the Los Angeles Dodgers, respectively, as champions. Still, with coronavirus cases surging to record highs in the U.S., it remains to be seen if the NFL and other major sports can do the same.
Well, that is presumably good news on the sports events front. But what about earnings expectations?
Wall Street Expectations
What really determines the outcome of whether a stock will pump or dump into and following earnings? Wall Street expectations, of course!
So what do Wall Street equity researchers think about DraftKings?
According to a Yahoo Finance:
The Zacks Consensus Estimate for revenues currently stands at $132.2 million. The consensus mark for loss has widened from 48 cents to 64 cents per share over the past 30 days.Zacks Equity Research, Yahoo Finance
It appears the positive company news is drawing large expectations of growth. This is especially true when considering the previous earnings report.
Essentially, Wall Street is expecting nearly 100% revenue growth, with a softening of expectations for the per share loss. Hmm…
Why We Recommended Buying The Dip
On October 19th, when stocks were getting hammered, we recommended buying the dip on many momentum stocks. Here is a link to our previous DraftKings article.
At the time, the stock was getting smacked down hard. We did not buy into the fear and noted many of the positive developments occurring and recommended considering buying that dip.
This worked out well for our team, considering the stock squeaked out a 25% move trough to peak. And it only took a few days. Big gains in small time frames are the best gains.
So why did we recommend sticking with DraftKings?
Positive Company Developments
There are many positive developments for the legalized sports betting industry. Just recently, Maryland, Louisiana, and South Dakota joined 21 other US states in the race to legalize sports betting across the country.
States across the country are trying to shore up lost revenue following the draconian lockdowns. These lockdowns have caused extraordinary damage to each state’s economy, forcing them to look for alternative ways to generate revenue.
For this reason, we believe states will continue to legalize sports betting, as well as recreational marijuana. These are positive developments for both the cannabis and sports betting industries AKA stocks.
Aside from the macro environment, DraftKings has been working on a plethora of partnerships. We believe these connections position the company for consistent, long term growth.
Recent Expansion Press Releases
Below is a list of the latest positive news and deals from the company website:
BOSTON, Nov. 02, 2020 (GLOBE NEWSWIRE) — Today, DraftKings announced an exclusive, multi-year relationship with Bryson DeChambeau, who will become the first active professional golfer to represent the digital sports entertainment and gaming company via an integrated brand, content, marketing, and VIP centric collaboration that will feature Bryson DeChambeau as the face of DraftKings golf. Bryson is currently ranked No. 6 in the Official World Golf Ranking and is coming off his first major championship at the U.S. Open in September, 2020. Starting with the 2020 Masters, the DraftKings logo will be featured on DeChambeau’s signature golf cap.
Taking over golf, eh? Bullish!
Next, expansion into the Tenessee market. DRAFTKINGS SET TO LAUNCH ITS MOBILE SPORTSBOOK IN TENNESSEE
BOSTON, Oct. 30, 2020 (GLOBE NEWSWIRE) — DraftKings, Inc. [Nasdaq: DKNG] announced today it will officially be launching its top-rated mobile sportsbook app in Tennessee, on Nov. 1 ahead of Sunday’s full slate of football games. Tennessee will become the ninth state to offer DraftKings’ mobile and online sports betting product, more than any other legal sports betting operator in the United States. The DraftKings Sportsbook offers customers innovative, state-specific promotions and odds boosts, free-to-play pools, bet types and more.
BOSTON and LAS VEGAS, Oct. 28, 2020 (GLOBE NEWSWIRE) — DraftKings Inc. (Nasdaq: DKNG) today announced a multi-year agreement to become a primary sponsor of the Center for Gaming Innovation, housed within the International Gaming Institute (IGI) at the University of Nevada, Las Vegas (UNLV). The agreement includes the opening of the new DraftKings Gaming Innovation Studio at UNLV and provides DraftKings with access to local talent, while furthering the company’s ties to the Las Vegas community.
Primary sponsor of the Center for Gaming Innovation…sounds bullish!
Conclusively, we still believe DraftKings’ growth is in its infancy. Multiple expansion plans announced just in the past month, states legalizing gambling and the sports comeback. These factors combine to create a pretty bullish environment. It appears likely that more states will recognize sports betting across the country. The need to bring in revenue to make up for massive amounts of lost revenue from the COVID lockdowns will be a major factor. As well as the fact that major sports games, from football to golf, will eventually open back up completely. We remain convinced this is a growing and increasingly lucrative industry. Let’s see what we get tomorrow! #BuyTheDip.
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