DraftKings Stock Jumps On Strong Q1 Earnings Results; Is DKNG Stock A Buy Right Now?

As sports-betting legalization spreads across U.S. states, DraftKings (DKNG) is at the forefront of the sports-betting industry. Amid huge price moves since its April 2020 debut, is DKNG stock a buy right now?

DraftKings stock slid 2.8% Thursday, closing below a 21.72 buy point in a cup base. DKNG stock closed at 21.31.

Late Thursday, DraftKings reported better-than-expected Q1 earnings and sales results. The company lost 87 cents a share on sales of $769.6 million. Wall Street expected the company to lose 88 cents per share on sales of $704.3 million, per FactSet. DraftKings also raised its full-year revenue guidance.

Shares soared nearly 9% in extended trade, signaling a move back above the buy point if the gains hold into Friday’s open. DKNG stock traded around 23.20 a share in the afterhours session.

DraftKings Fundamental Story

The expanding legalization of digital sports betting is an emerging trend. The November 2020 election results showed voters in several states largely approved ballot measures that legalized sports betting and other gaming expansion measures.

Boston, Mass.-headquartered DraftKings is primed to take advantage of this burgeoning shift in state attitudes toward sports betting. DraftKings is an online sports platform that allows users to play daily fantasy games and win cash prizes.

Sports-betting prospects look strong, with around 20% of U.S. adults saying they bet money on sports in some way in the last 12 months, according to a 2022 Pew Research Center survey. The American Gaming Association reports that commercial betting industry saw record revenue in 2022.

DraftKings is on the road to profitability. After losing $3.16 per share in 2022, the company is expected to lose $2.06 in 2023 and 99 cents in 2024, according to IBD data.

DraftKings Stock: Strong Revenue Growth

On Feb. 16, DKNG topped fourth-quarter estimates, reporting a smaller-than-expected loss. The company lost 53 cents per share vs. an 80-cent loss a year earlier. Meanwhile, DraftKings Q4 revenue grew 81% to $855 million.

On the year, DraftKings reported a loss of $3.16 per share as revenue grew 73% to $2.24 billion. Analysts see DraftKings revenue growth continuing, averaging an annual increase of 22% through 2026.

DraftKings IBD Stock Ratings

As a result of the company’s lack of profitability, DraftKings’ Earnings-Per-Share Rating is a weak 46 out of a best-possible 99. The EPS Rating measures a company’s ability to grow profits year over year, using the most recent two quarters and the past three-to-five years of earnings growth.

According to the IBD Stock Checkup, DKNG stock shows an improving 93 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.

DKNG Stock Technical Analysis

DKNG stock is already up more than 83% year to date in 2023. Shares are trying to break out past a cup base’s 21.72 buy point.

DraftKings stock is below the latest entry, according to IBD MarketSmith chart analysis, after recent losses.

Is DKNG Stock A Buy Right Now?

DraftKings stock is a promising long-term prospect in the sports-betting industry, and the company’s potential is encouraging. Despite a lack of earnings, the company has strong revenue growth and is one of the leaders in the online-betting megatrend. Since the stock is not above the buy point, it is not a buy right now. Keep in mind that the imminent earnings report does increase the risk of this latest breakout move.

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