DraftKings Breaks Out To New High

DraftKings Inc. (DKNG) broke out above the June high at 44.79 on Monday, lifting to an all-time high just below 50. A measured move target in the low 60s looks conservative for the rapidly-growing company, with persistent buying volume underpinning the upside.  The successful launch of the new National Football League season over the weekend is adding to bullishness that’s been solid as a rock due to continued isolation as a result of the pandemic.

DraftKings Legitimizes Sports Betting

Many U.S. states don’t allow sports betting but are expected to jump on board due to the wildly-successful fantasy portal, which has legitimized this once-questionable activity. The stock has booked stronger-than-expected returns so far this year, given the closure of major sports venues and re-start issues that have generated outbreaks among athletes and staff. The weekend’s NFL games may have finally turned the tide to optimism, even though most stadiums aren’t permitting live spectators.

The Benchmark Company analyst Mike Hickey raised their target from $45 to $57 on Tuesday, noting that DraftKings had just “announced a new deal with ESPN to be the co-exclusive sportsbook link-out provider. Prior brand building deals included Michael Jordan and the Chicago Cubs, all of which are elevating the brand and further legitimizing sports betting. We believe the virus influence will also provide a significant boost to player engagement in Q3.”

Wall Street And Technical Outlook

Wall Street consensus is positive but somewhat cautious, with a ‘Moderate Buy’ rating based upon 10 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell positions at this time. Price targets currently range from a low of $34 to a street-high $60 while the stock is now trading just below the $50 median target. These projections could easily go higher if the sports seasons now getting underway don’t run into roadblocks.

There’s a lot to love about DraftKings from a technical perspective, despite the nearly 500% return so far in 2020. The initial rally wave lasted less than three months, lifting price from 10.60 to 44.79. Price action then spent more than three months carving a rounded consolidation pattern, with support at the 50-day moving average. This process has efficiently eased overbought readings through time rather than price, raising odds the current breakout will yield sustained upside.

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