Home » Sports Betting Giant Climbs In Base, Proceed With Caution

Sports Betting Giant Climbs In Base, Proceed With Caution

IBD 50 sports betting stock DraftKings (DKNG) is recovering from a plunge and is in a cup base — but there’s a caveat.




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DraftKings stock has reclaimed a key level after the company reported earnings and raised its internal forecast. However, shares are in a late-stage base, making the prospect of investing in the stock risky.

The company is a leading sports betting online platform offering wagering on live sports, fantasy sports and casino games including blackjack, roulette and slots. Users can start betting with as little as $5 on more than 18 sports in 24 states and Canada. DraftKings has its sights set on Puerto Rico for a new market.

Some form of sports betting is currently legal in 38 states and the District of Columbia. Its biggest rival is FanDuel for sports betting market share.

DraftKings Stock Climbs Back After Raised Guidance

The stock is in a third-stage cup base with a 49.57 buy point, according to MarketSurge chart analysis. Shares reached a 52-week high on March 27, before plummeting and closing the session lower 6.8% in heavy volume. The drop came following news that NCAA President Charlie Baker was pushing for a ban on a type of bets in college sports, just as March Madness was in full force.

The plunge began the new base. The stock fell below its 10-week moving average on news that two Cathie Wood exchange traded funds — ARK Innovation (ARKK) and ARK Next Generation Internet (ARKW) — sold a total of 285,524 DraftKings shares in mid-April. DraftKings stock reclaimed its 10-week line the week ended May 17.

Investors should beware that third-stage base breakouts may have a higher likelihood of failing than earlier stage bases, as the stock is getting tired and investors may have taken profits. In addition, volume has been trending lighter than average, indicating demand is waning.

The sports betting company topped its first quarter sales estimates on May 2, with a 53% increase over the prior year’s quarter. Its adjusted earnings were three cents a share, swinging from a 51 cent-per-share loss in the year-earlier quarter. Monthly unique payers increased 23% to 3.4 million over the first quarter of 2023.

DraftKings Raises Revenue Outlook

Management raised its full-year 2024 revenue forecast to $4.9 billion at the midpoint from $4.775 billion. The company expects improved customer acquisition and engagement for the remainder of 2024.

FactSet second-quarter estimates show adjusted earnings of 17 cents a share, then a loss of 13 cents a share in the third quarter. Quarterly sales growth is expected to slow to 26% in the second quarter followed by 31% in the following two periods.

Besides DraftKings stock, two other IBD 50 names in stage two bases nearing buy points may have a better chance after breaking out. Wealth management stock Blue Owl (OWL) is in a flat base and climbing to a 19.87 buy point after retaking its 10-week line.

Also, IBD SwingTrader position CrowdStrike Holdings (CRWD) is in a cup base with a 365 buy point. The cybersecurity firm impressed investors with its generative artificial intelligence at the recent RSA global cybersecurity conference.

Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.

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