What happened
Shares of Draftkings (DKNG 1.63%) were trading down 3% as of 1:02 p.m. ET on Tuesday. Although there was no company-specific news to explain the fall, unprofitable companies continue to get hammered in this bear market.
Draftking's net loss widened in the first quarter to $467 million. Given that stock direction follows earnings over the long term, the lack of profitability might continue to weigh on the stock price in the near term.
While the stock is off 82% from its all-time high in 2021, Draftkings continues to draw support from famed investor Cathie Wood.
So what
Wood purchased 103,268 shares of Draftkings on Monday, May 9 for the Ark Fintech Innovation ETF, according to arkinvestdailytrades.com. The Ark Fintech ETF is down 58% year to date. Wood clearly likes the secular trends of more states legalizing sports betting and how that could be a huge boon for Draftkings, one of the leading players in online wagering.
Revenue growth hasn't been a problem for Draftkings. The top line accelerated each year from 2018 through 2021, with last-year's revenue more than doubling over 2020. The company recently raised its full-year guidance for 2022. Management now expects full-year revenue to be between $1.925 billion to $2.025 billion, representing an increase of 49% to 56% year over year.
Most importantly, management reported that it's not seeing any impact from inflationary pressures on customer demand.
Image source: Getty Images.
Now what
During the earnings call, management mentioned that "the pipeline for new states remains robust." Draftkings is currently live with online sports betting in 17 states, but that leaves more than half the country's population still to go.
Perhaps the stock will find a bottom soon and rebound, but sustained gains will depend on the company's path to profitability.
