What happened
DraftKings (DKNG 4.96%) saw its stock price surge 13.2% higher in April, according to S&P Global Market Intelligence. As of May 4, DraftKings was trading at about $21.50 per share, up approximately 87% year to date (YTD).
It outperformed the major market indexes, as the S&P 500 was up 1.5%, the Dow Jones Industrial Average climbed 2.5%, and the Nasdaq Composite was essentially flat in April.
So what
DraftKings, a leading site for online sports betting and fantasy sports, has continued to outperform the market, as it has launched some new products and sports betting has been legalized in more states.
In March, DraftKings got a boost when its home state, Massachusetts, legalized sports betting, and then later in March it launched DK Horse, a betting site for horse racing. Both of these events helped propel the stock higher in April.
Several analysts are bullish on the stock, including Argus. Argus analyst John Staszak posted a research note last month, saying he expects DraftKings to hit $3.1 billion in revenue in fiscal year 2023, which is at the high end of its guidance range. The analyst cited the legalization of sports betting in additional states and declining customer acquisitions costs. He set a $22 price target and a buy rating, reported The Fly.
Another catalyst in April may have been reports that DraftKings was planning to launch a free, ad-supported video streaming service, DK Network. "Over the years, DraftKings has expanded our media footprint by securing top talent and trusted personalities across sports media, and we've begun the initial rollout of DK Network," company officials said, reported Bloomberg.
Now what
DraftKings had a blowout fourth quarter, with revenue up 81% year over year, which sent the stock price flying higher. The company reports first-quarter earnings at the close of the market today, May 4, so investors should be on the lookout for that to see if it can keep the momentum going.
The company is not yet profitable, but it is heading there, with its net loss shrinking last year. In the fourth quarter, it had a net loss of $242 million, down from a net loss of $326 million in the fourth quarter of 2021. The Argus analyst anticipates profitability in the third quarter of 2024, with a five-year earnings growth rate of 25% thereafter.
Currently, 35 states have legalized sports betting, and that number will increase as several states have proposed legislation, including Maine, Oklahoma, North Dakota, and Missouri. Online sports betting is not legal in some big states like Texas, California, and Florida, so there remains huge growth potential down the road.
