Sports betting giant DraftKings is Tuesday's pick for IBD 50 Growth Stocks To Watch. DraftKings stock is in a new buy area after a bullish rebound from a support level. That makes DKNG one of the best stocks to watch in today's market.
DraftKings' 2023 success placed the stock on IBD Leaderboard.
DraftKings, one of the first bookmakers to ride the early wave of sports betting legalization in the U.S., continues to build its presence through heavy advertising. The company continues to secure approval to operate in states where sports betting is legalized.
In a Nov. 14 investor presentation, DraftKings noted that betting participation in multiple states is larger and growing faster than previously anticipated. The company expects the online sports betting and iGaming total addressable market to leap from $20 billion in 2023 to around $30 billion in 2028 in states where DraftKings currently operates.
DraftKings Earnings Narrow
In the third quarter, reported Nov. 2, DraftKings' bottom line came in stronger than expected, along with revenue growth and user growth. DraftKings narrowed Q3 losses to 35 cents a share on a 57% revenue gain to $790 million.
Analysts on Wall Street were "positive on product execution, fourth straight quarter of market share improvement, traction behind business initiatives, and expense discipline," according to FactSet.
In fact, the company has been posting smaller year-over-year losses every quarter since Q2 of 2022.
Analysts expect the company's loss per share to narrow to $1.20 in 2024. That loss should further narrow to 10 cents in 2025, according to FactSet. Wall Street expects the company's first annual profit in 2025.
While DraftKings' losses are tapering, it remains unprofitable. So DraftKings stock has a weak 64 out of a best-possible 99 Earnings Per Share Rating, according to IBD Stock Checkup.
With the stock about 10% off its 52-week high, DraftKings stock also shows a mediocre 71 out of 99 IBD Composite Rating.
Learn How To Time The Market With IBD's ETF Market Strategy
DraftKings Stock In Buy Zone
From their Oct. 26 lows to the 52-week high set on Nov. 27, DKNG shares rallied 53%.
The stock is in buy range from a 34.49 buy point in an undefined base. The 5% buy area runs up to 36.21. DKNG is also finding support around its 50-day moving average, according to IBD MarketSmith chart analysis. DraftKings stock dropped 0.5% Tuesday, as it tests resistance at the 21-day exponential moving average.
Keep an eye on the 50-day line. While shares are about 4% above that level, a sharp breach of the level would be a sell signal and a sign for investors to lock in profits or cut their losses.
A technical metric to watch is the relative strength line. DKNG stock's RS line hit a new high during the early-November breakout, which reiterated the stock as a market leader. That's a sign of long-term stock market outperformance.
With IBD recommending 80%-100% market exposure, investors have the opportunity to raise exposure through buying stocks making strong breakouts. And DraftKings stock deserves a look.
Best Stocks To Buy And Watch
Three recent IBD 50 Growth Stocks To Watch picks are among the best stocks to buy and watch, along with DKNG stock.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Royal Caribbean | 112.95 | Cup base | |
| Snowflake | 192.66 | Cup with handle | |
| Microsoft | 366.78 | Cup base |
Source: IBD Data As Of Dec. 26, 2023
Follow Scott Lehtonen on X/Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
