Friday morning saw DraftKing (DKNG) shares soar 15% higher after the company reported impressive earnings for the fiscal fourth quarter and raised its outlook for 2023. After the weekend, this trend continued. In Monday morning’s trading session, the stock is already up another 15%.
Investors are in a frenzy over DraftKings after the company reported revenue of $855 million in the fiscal fourth quarter of 2022. This figure is nearly double the $473 million they reported the same quarter a year prior.
Now, there’s no question that this is cause for excitement – until you realize the company took a steep loss of $0.53/share on that revenue. With that said, this is still an overperformance as analysts were expecting a loss of $0.59/share.
According to DraftKings executives, this jump in revenue is a result of focusing on customer retention along with acquisition and engagement in states where sports betting has already been legalized.
The company isn’t slowing down anytime soon, either. The app became the most downloaded sportsbook app in the US on Super Bowl Sunday. And in states where sports betting has recently been legalized, DraftKings is seeing a massive spike in revenue: Maryland, Kansas, and Ohio to name a few.
As a result of all this, DraftKings raised its fiscal year 2023 revenue guidance. Now, the company is projecting $2.85 billion to $3.05 billion. This is up from the previous outlook of $2.8 billion to $3 billion. If DraftKings is able to perform to this standard, it’ll result in a growth rate of up to 36% year over year.
So – should you buy DKNG and ride the hype along with other investors? Before you make your next move, you’re going to want to see these two red flags we uncovered for you through the VectorVest stock analysis software.
Despite Excellent Timing, DKNG Has Very Poor Upside Potential and Poor Safety
VectorVest simplifies your trading strategy – saving you time and boosting your success rate. By giving you all the insights you need in just three simple ratings, you can win more trades with less work.
These ratings are relative value (RV), relative safety (RS), and relative timing (RT). Each of these ratings sits on a scale of 0.00-2.00, with 1.00 being the average. Stocks with ratings over the average are performing better than those with ratings under the average – it doesn’t get much simpler than that.
But to make things even easier, VectorVest gives you a clear buy, sell, or hold recommendation based on the overall VST rating for any given stock, at any given time – including DKNG. Here’s the current situation:
- Very Poor Upside Potential: The RV rating assesses a company’s long-term price appreciation potential and compares it to AAA corporate bond rates & risk. As for DKNG, the RV rating of 0.25 is very poor. And, the stock is overvalued at its current price – with a current value of just $2.77/share.
- Poor Safety: In terms of risk, DKNG has poor safety as well – with an RS rating of 0.64. This is calculated by analyzing the company’s financial consistency and predictability, debt-to-equity ratio, and business longevity.
- Excellent Timing: The one thing DKNG has going for it right now is the strong price trend that has formed. As a result, the timing is excellent for this stock right now – as confirmed by the RT rating of 1.95. This rating is calculated based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week, over week, quarter over quarter, and year over year.
The overall VST rating for DKNG works out to 1.27 – which is good. But is this rating skewed by the temporary hype around the stock? Is it time to buy DKNG, or should you wait to see how this trend holds over the coming days? Don’t play the guessing game or let emotion influence your decision-making. Get a clear answer on your next move with a free stock analysis today.
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VectorVest advocates buying safe, undervalued stocks, rising in price. Right now, DKNG has excellent timing as a result of their upbeat earnings report & raised guidance. However, the long-term price appreciation potential is very poor, and the stock has poor safety as well.
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