Trading On margin

Should you get some lower DraftKings shares back?

Sports betting operator DraftKings Inc. (DKNG) offers digital sports entertainment, sports betting and iGaming products. The company went public on April 24, 2020, through a reverse merger with blank check firm Diamond Eagle Acquisition Corp. Its recent launch of an NFT ecosystem – DraftKings Marketplace – to give sports fans access to the digital collectibles of top athletes has pushed its shares up 10.2% since the start of the year. But DKNG’s share price has fallen 9.1% in the past month and 23% in the past six months. Closing yesterday’s trading session at $ 51.33, its stock is trading 31% below its 52-week high of $ 74.38.

Additionally, DNG is currently trading below its 50-day and 200-day moving averages of $ 54.15 and $ 55, respectively, indicating a downtrend. While expanding its online sports betting into new markets may help grow its customer base and further improve fan engagement, there are several class actions filed against the company that could further bearish investor sentiment.

In addition, his planned takeover of British gambling company Entain, which already has a joint venture with MGM Resorts International (MGM), requires the agreement of MGM. The uncertainty surrounding the deal could lead the stock to experience more dramatic price swings in the short term.

Here’s what could influence DKNG’s performance in the coming months:

Class actions

In July, a lawsuit was filed against DKNG alleging violations of securities laws. According to the Applicant, the DKNG has made substantially false and misleading statements regarding its merger with SBTech and its operations. Additionally, this month, securities class actions were filed against the sports betting company by Levi & Korsinsky, LLP, the law firm Schall, Jakubowitz Law and several other law firms on behalf of shareholders. for allegedly misleading public statements related to its merger. These lawsuits could shake up investors, causing the DKNG share price to fall further.

$ 22 billion deal uncertain

This month, DKNG made a $ 22.4 billion acquisition proposal to UK online sports betting company Entain, which will be paid largely in shares. The proposal comes after the U.K. company rejected an offer of shares worth $ 11 billion from MGM Resorts earlier this year. However, given that Entain and MGM already have an online sports betting collaboration called BetMGM in the United States, which controls around 21% of the marketcompared to 17% for DKNG, any transaction involving DKNG and Entail would require the consent of MGM. In a recent statement in response to the potential deal, MGM said, “Any transaction whereby Entain or its affiliates would own a competing business in the United States would require the consent of MGM.”

Unstable financial data

In the second quarter, ended June 30, 2021, DKNG reported total revenue of $ 297.61 million, an increase of 319.6% year-over-year. But the company’s operating loss is up 100.4% from its value a year ago to $ 321.6 million. In addition, DKNG’s net loss was $ 305.53 million, while its overall loss was $ 297.83 million for the quarter. Additionally, he reported a loss of $ 0.76 per share.

Its 12-month leveraged free cash margin of 3.5% is 52.4% below the industry average of 7.4%. In addition, DKNG’s 0.3% asset turnover rate is 70.7% lower than the industry average of 1.1%. In addition, its net profit margin, EBITDA margin, and ROE are negative at 121.2%, 104.6% and 58.7%, respectively.

Premium assessment

In terms of futures price / sales, DKNG is currently trading at 16.19x, which is 1214.1% above the industry average 1.23. In addition, its rolling 12-month EV / sales ratio of 18.30 is 1,074.5% higher than the industry average of 1.56. Additionally, DKNG’s futures price / pound multiple of 12.04 compares to the industry average of 3.49.

POWR ratings reflect grim prospects

DKNG has an overall F rating, which translates into a strong sale in our POWR odds system. POWR scores are calculated by considering 118 separate factors, each factor being weighted to an optimal degree.

Our proprietary scoring system also rates each stock against eight distinct categories. DKNG has a D rating for growth. This reflects the stock’s inadequate financial position and its low growth potential.

The company received an F rating for value and quality, which is consistent with its negative net profit margin and higher valuation multiples than the industry.

Beyond the notes I have underlined, one can check out additional DKNG notes for feeling, stability and momentum here. DKNG is ranked # 30 out of 31 stocks in the C-rated Entertainment – Casinos / Gambling industry.

Final result

While DKNG’s advance in the NFT space and expansion into the online sports betting market could generate additional revenue for the company, its substantial losses could put downward pressure on its stock. Additionally, given the uncertainty surrounding its deal with a UK sports betting company and the challenges the company faces, investors may remain concerned. So we believe it is better to avoid DKNG actions now.

How does DraftKings Experience (DKNG) compare to its peers?

While DKNG has an F (strong sell) rating in our proprietary rating system, one might consider taking a look at its industry counterpart, Golden Entertainment, Inc. (GDEN), Boyd Gaming Corporation (BYD) and Century Casinos, Inc. (CNTY), which have an A rating (strong buy).

Note that BYD is one of the few handpicked stocks currently in the Reitmeister Total Return portfolio. Learn more here.

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DKNG shares fell $ 0.14 (-0.27%) in pre-market trading on Monday. Year-to-date, DKNG has gained 10.24%, compared to a 19.89% increase in the benchmark S&P 500 over the same period.

Imon is an investment analyst and journalist with a passion for financial research and writing. She started her career at Kantar IMRB, a leading market research and consumer advisory organization. Following…

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