DraftKings

DraftKings In Rally Mode After Gartley Buy Signal

DraftKings Inc. (DKNG) is trading higher by 3% in Monday’s pre-market after announcing the acquisition of Golden Nugget Online Gaming Inc. (GNOG) in an all-stock transaction currently valued at $1.56 billion. The deal, which is expected to close in the first quarter of 2022, will bolster market share in an online sports gaming industry that’s attracted heavy competition since the company came public in its current form in December 2019.

Rapid Growth But No Profits

DraftKings has yet to post a profitable quarter but it beat Q2 2021 estimates in Friday’s release, with revenue surging 319.7% year-over-year to $298 million, more than $50 million higher than expectations. Monthly Unique Players (MUPs) rose 281% compared to the same quarter in 2020, indicating “strong unique player retention and acquisition across DFS, OSB and iGaming, the expansion of our OSB and iGaming product offerings into new states, and the lack of traditional sports for much of the second quarter of 2020 due to the negative impact of COVID-19.”

The Benchmark Company analyst Mike Hickey raised the firm’s target to $70 on Monday, noting that “DraftKings delivered strong Q2 2021 financial results and raised their fiscal year 2021 revenue forecast. Player engagement and monetization have achieved better than expected results and suggests player LTV may be higher than originally expected. DKNG continues to efficiently acquire players at a CAC at or below target.”

Wall Street and Technical Outlook

Wall Street sees a bright future for DraftKings, posting a consensus ‘Overweight’ rating based upon 17 ‘Buy’, 1 ‘Overweight’, and 9 ‘Hold’ recommendations. Price targets currently range from a low of $42.50 to a Street-high $105.00 while the stock is set to open Monday’s session about $19 below the median $72.50 target. This low placement could ignite upside in coming sessions, given the promising quarter and aggressive acquisition.

DraftKings fell to 10.60 in March 2020 and turned sharply higher, breaking out to a new high in April. The rally carved three waves into March 2021’s all-time high at 74.38, ahead of a correction that’s been crisscrossing the 50- and 200-day moving averages for the last three months. Accumulation is now surging, indicating the pullback may have come to an end, setting the stage for a strong uptick that could easily reach and exceed the first quarter peak.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.