DraftKings (DKNG:NASDAQ) is one of the companies that divides critics’ opinions. The US fantasy sports and betting operator has a market cap of $9.7 billion and 60% growth in Q3 revenue, but a net loss of over $500 million.
At this point, DraftKings is legal in 15 states, reaching just 29% of the US population. Despite the limitation, it has amassed 1.3 million individual paid customers per month. Quite impressive!
By now, those of you familiar with this company are probably asking how to buy DraftKings stock and if it’s worth having a stake in it. Those of you who haven’t heard of it, however, are likely wondering – what is DraftKings. We’ll try to answer most of the questions you may have in this article and address some things worth considering.
Continue reading to find out:
- More about the DraftKings company
- Its stock performance
- How to invest in DraftKings
About the Company
DraftKings.inc is a digital sports betting company that allows users to participate and bet on daily fantasy sports. Players can win money by best individual performance in sports ranging from major American sports, through European and Canadian football leagues, to MMA and tennis.
The company was founded in 2012 and was initially solely a fantasy sports website. After a Supreme Court Decision to legalize sports betting in 2018, the company transformed into an online betting house. Its three co-founders, Jason Robins, Matt Kalish, and Paul Liberman, were avid fantasy sports players but were sick of having to wait for end-of-season payouts. So they came up with the idea of daily fantasy sports (DFS). The concept was not unique to them, and there were already more than 20 companies on the market with a similar product. However, DraftKings managed to rise as a leader in an industry field that has the potential to bring earnings of billions of dollars. This proved to be true, especially during COVID-19 restrictions when there were no live matches for some time.
DraftKings went public as of recently. Draftkings stock IPO date was April 24, 2020. To avoid the lengthy exchange listing process, the company went through a reverse takeover, merging with its SPAC sponsor and SBTech – a Bulgaria-based gaming technology company. While the move has helped shorten the listing process, it has also caused some controversy.
How Does DraftKings Make Money?
A year after the merger, Hindenburg Research accused DraftKings of having ties with the black market. The investment research firm claimed that the merging with SBTech has exposed DraftKIngs’s shareholders to transactions on the black market, laundering, and other criminal activities.
Though causing a heated discussion, since the report was published, Hindenburg shared with the public that it has taken a short position in DKNG stocks (a stock selling technique utilized when investors speculate on the decline of stock price). This was also pointed out in the statement DraftKings released to the press, in which they denied all allegations. While the SEC has been looking into the case, no black market links have been proven.
So ultimately, DraftKings makes money through fees, advertising, and partnerships with other companies in the sports industry. The company also profits from its three mobile apps and e-shop for branded merchandise.
Should You Buy Draftkings Stock
The stock market is inevitably volatile. Yet, this cannot be labeled as COVID-19 induced anymore, as investors no longer calculate their moves by how the pandemic is developing. That’s why when deciding to buy any type of stock, you should research not only the company but how its stock fits into your portfolio. DraftKings stock is no exception to this.
So, is DraftKings a buy? Let’s have a look at the metrics.
DraftKings stock performance
Trading as high as $74 in 2021, DraftKings stock has lost value in recent months. At the beginning of 2022, the shares are changing hands at around $20. The 52 week-low for DraftKings is $17.41. Compared to last years’ performance, DraftKings stock price has gone down by more than 60%. However, the average DraftKings price target is $44.53, thus considered to be undervalued for the time being.
DraftKings stock shows a P/S (price-to-sales) ratio of 7.16 as of the end of January 2022. This ratio is usually an indicator of how high the stock price is compared to the company’s revenue. In general terms, the lower this ratio is, the better. A P/S ratio of anything between 1 and 2 is considered good. However, the higher ratio in the DraftKings case could indicate that the company needs more time to mature. That may be one of the reasons why the company still doesn’t pay a dividend – another thing anyone wondering how to invest in DraftKings should take into consideration.
Finally, we can address DraftKings Beta as well. This measures how volatile DraftKings stock is when compared to the volatility of the rest of the market. While the average NASDAQ Beta is 1, DraftKings Beta is 1.8967. Though DraftKings is above the average, meaning representing a higher risk, it can also indicate higher returns as well.
Since this is a relatively new stock on the market, it will need time to prove itself valuable. Most metrics that investors look into when deciding whether a stock is a buy are still relatively new. That is why you may want to rely more on your portfolio in this case and not just on DraftKings stock predictions.
Comparing this stock to the rest of your line-up can be beneficial. If nothing else, it might give you insight into your nature as an investor. Having this stock into their portfolio may be for investors who want to make returns on the potential of online gambling. However, no stock comes with a guarantee to increase in value. Not even the largest public companies and blue chips.
How to Buy DraftKings Stock
If you’ve already made up your mind about DraftKings and want to invest in the fantasy sports and betting operator, here are the available routes:
Online brokers/trading platforms
If you decide to invest in DraftKings through an online brokerage firm or an online trading platform, you will be able to do so through pretty much every US-based platform. The DKNG stock is trading on NASDAQ, and most brokers have access to this exchange.
Knowing that, if you’re already using an online broker, you can buy DraftKings shares through your existing account. If, however, you’re a new investor and are still undecided which way to go, try checking out the reviews on our website. They can give you a better insight into some of the best platforms and whether you’re eligible to become an account holder. Some trading venues are tailored toward novice investors, while others offer more advanced features to fit the needs of experienced traders.
Once you choose a platform, set up your account and place a deposit in it. Next, you’ll have to decide how many shares you’ll buy and which order type you’ll use. And finally, you can make the purchase.
You’re almost done with reading this article but are still wondering – is DraftKings a good investment? A financial advisor can help you get a better grasp of your finances at the moment or make an individual financial plan and see if and how DKNG stock fits into your portfolio. Relatively new stock can always divide opinions, not just when speaking of beginner investors.
Not all financial advisors can trade on the stock market, but most of them can provide you with financial advice or serve as a liaison between you and your broker. Consulting a professional in the financial field on DraftKings value can always be a plus.
Keep in mind that financial advisors charge different fees and offer various services. Also, in addition to traditional human professionals, there are robo advisors that provide less personalized but more affordable guidance. You should pick the option that best suits your needs.
As the business is still not legal in all US states, DraftKings invests considerable amounts of money in marketing and promotional activities to attract new customers. The DraftKings company is yet to prove profitable and its novel stock to be valuable on the already volatile market. That being said, how to buy DraftKings stock should not be the only concern potential investors have.
The DraftKings IPO took place on April 24, 2020, offering the company’s shares under the ticker symbol DKNG. To bypass the lengthy listing process, DraftKings went public through a reverse takeover, merging with its SPAC sponsor SBTech.
DraftKings has the potential to become a growth company and pay dividends to shareholders in the long term. However, it is still relatively new on the market, and as with any stock, investing in it does carry certain risks.
The company is still not profitable and is observed as risky by some investors. However, long-term investors who perform a DraftKings analysis can see an advantage in the company’s potential to expand and become legal in more states, DraftKings revenue growths, and the below-target price of its stock.
Every investor has different views on whether a stock is a buy or not and has different reasons behind them. Make sure that before investing, you are not considering just the potential of the company and DraftKings stock projections. Double-check how it fits into your portfolio as well. Read the article above if you need more info on how to buy DraftKings stock.