sports betting giant draft kings (DKNG) was named an IBD 50 Growth Stock to Watch on Tuesday. DraftKings stock is entering a new buying window after a bullish rebound from support levels. That makes DKNG one of the most interesting stocks on the market today.
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DraftKings’ success in 2023 has put the stock on the IBD leaderboard.
DraftKings was one of the first bookmakers to ride the early wave of sports betting legalization in the United States, and continues to grow its presence through extensive advertising. The company continues to win approval to operate in states where sports betting is legal.
In a Nov. 14 investor presentation, DraftKings noted that betting participation in multiple states is larger than previously expected and is increasing rapidly. The company projects that the total addressable market for online sports betting and iGaming will jump from $20 billion in 2023 to approximately $30 billion in 2028 in the states where DraftKings currently operates.
DraftKings’ revenue is narrow
In the third quarter reported on Nov. 2, DraftKings’ revenue was stronger than expected, with revenue growth and user growth. DraftKings narrowed its third-quarter loss to 35 cents per share as revenue rose 57% to $790 million.
According to FactSet, Wall Street analysts were “upbeat on product execution, market share gains for the fourth consecutive quarter, traction in business initiatives and expense discipline.”
In fact, the company has posted smaller year-over-year losses every quarter since the second quarter of 2022.
Analysts expect the company’s loss per share to narrow to $1.20 in 2024. Losses should further narrow to 10 cents in 2025, according to FactSet. Wall Street expects the company to achieve its first annual profit in 2025.
Although DraftKings’ losses are decreasing, it remains unprofitable. Therefore, DraftKings stock has a weak earnings per share rating of 64 out of 99, according to IBD Stock Checkup.
The stock is down about 10% from its 52-week high, and the DraftKings stock has a mediocre IBD Composite Rating of 71 out of 99.
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DraftKing Buy Zone Inventory
From its low on October 26 to its 52-week high on November 27, DKNG stock rose 53%.
The stock is in buy range from a buy point of 34.49 on an undefined basis. The 5% buy area continues until 36.21. According to IBD MarketSmith chart analysis, DKNG is also finding support near its 50-day moving average. DraftKings stock was down 0.5% at midday Tuesday as it tested resistance in the 21-day exponential moving average.
Pay attention to the 50-day line. The stock is trading about 4% above that level, and a significant break above that level would signal a sell and signal investors to book profits or cut losses.
A technical indicator to keep an eye on is the relative strength line. DKNG stock’s RS line hit new highs during its breakout in early November, once again proving that the stock is a market leader. This is a sign that the stock market has outperformed over the long term.
IBD recommends 80% to 100% market exposure, so investors have the opportunity to increase their exposure by buying stocks that have strong breakouts. And DraftKings stock is worth watching.
Best stocks to buy and watch
The three stocks recently named IBD 50 Growth Stocks to Watch are among the stocks to buy and watch, along with DKNG stock.
Source: IBD data as of December 26, 2023
Follow Scott Lehtonen on X/Twitter. @IBD_SLehtonen Learn more about the best stocks to buy and watch and the stock market here.
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