Should I Buy DraftKings (DKNG)? Finance YouTuber Analysis

The analyst believes DraftKings is undervalued, with a fair value of almost $38 compared to its current price of $26. He attributes its recent undervaluation to the lax regulatory environment for prediction markets, which have sidestepped the rigorous state-by-state approval process DraftKings undertook. He anticipates a potential regulatory shift in the future could create a significant tailwind for DraftKings, leveraging its established compliance infrastructure.

“I like DraftKings. I think it's a great value at the current market price.”

The analyst maintains a buy rating on DraftKings, citing its improved profitability with positive cash flow to sales and operating margins. The company is expanding into prediction markets, which could open new revenue streams, and its valuation is attractive at a forward price to operating cash flow of 13. The intrinsic value calculation suggests the stock is undervalued at its current price below $30.

“I think at a price less than $30 per share, DraftKings stock is an interesting buying opportunity for long-term investors.”

Travis Hoium argues that DraftKings faces significant headwinds due to the rise of prediction markets like Kalshi and Poly Market, which offer more efficient betting odds and are legal in all 50 states, unlike traditional sports betting. He highlights DraftKings' high customer acquisition costs and continued unprofitability, suggesting that increased competition from lower-margin prediction markets will erode future profitability and growth prospects, making the stock less attractive despite its high valuation.

“I think this is going to be a huge pressure point and could actually eat away at their profitability in the future. So, something to keep an eye on if you're interested in these sports betting companies. The future may not be as bright as you once thought.”

Travis Hoium argues that DraftKings faces fundamental long-term challenges to sustainable profitability. He highlights increasing customer acquisition costs, the ease with which customers can switch platforms, and critically, the growing trend of states imposing higher taxes on online gaming. Unlike physical casinos, online-only platforms like DraftKings offer no local economic benefits (jobs, tourism) that would incentivize states to keep taxes low, leading to an erosion of potential profits.

“this is why this is just a stock that I stay away from I don't see the long-term value and how this company becomes sustainably profitable.”

The YouTuber advises avoiding DraftKings, despite its high revenue growth, because it has not yet achieved sustained profitability and continues to burn significant cash. He questions the long-term sustainability of its business model due to high customer acquisition costs (SG&A expenses) and low customer switching costs in the online gambling industry, making it difficult to retain customers and achieve consistent profits.

“I just think there's ultimately going to be a cap on the profitability for a lot of these online gaming companies because the switching cost just isn't very big opening up a different app to look for the betting odds for a specific sports event or playing a different IE gaming game is very different than than the physical infrastructure that it takes to build casinos and build an ecosystem around something like the Las Vegas Strip or maau so I think those are going to be much more sustainable cash flows and investors who are betting on MGM and investors are who are betting on DraftKings are betting on something that is unknown in the future and has not proven to be profitable long term”

Travis Hoium advises avoiding DraftKings due to fundamental structural challenges in the online gaming business, including lack of customer lock-in and high, ongoing marketing costs to attract new users. He questions the sustainability of their revenue growth given the significant spending required to acquire customers and the limited remaining geographic expansion opportunities. Despite some improvements in operating losses and free cash flow, he believes the current $22 billion market cap implies profitability levels (1-3 billion in annual net income) that are not currently achievable.

“I just don't see a path to that right now. It is a very volatile business operations have been improving but given that tremendous amount of spending that it takes and all the commercials that you likely see when you're watching sports if you're listening to a sports related podcast that is all money that's going from DraftKings to their Partners so as an investor I want to be investing in the companies that are offering that advertising platform.”

The analyst advises avoiding DraftKings stock despite its revenue growth, citing persistent unprofitability due to high customer acquisition costs and a lack of operating leverage. He argues that online gambling is not a sticky, recurring revenue business, making it difficult to achieve long-term profitability, especially compared to competitors with physical casino assets that can offer real-world rewards.

“I think there's going to be a lot of pressure ahead for DraftKings there's going to be more and more competition these companies that have a physical infrastructure have a big advantage in the market and I don't think the future is bright for DraftKings”

Travis Hoium advises avoiding DraftKings stock due to its persistent inability to generate profit and free cash flow, despite revenue growth. He highlights high and unsustainable sales and marketing expenses, ongoing shareholder dilution through stock-based compensation, and a deteriorating balance sheet with declining cash reserves and stockholders' equity. Hoium questions the company's competitive moat in the online gaming sector, suggesting users will always seek the best odds across platforms, making customer acquisition costs perpetually high.

“I just don't see that on the horizon that's the reason this is a stock that I'm going to stay away from as the balance sheet deteriorates management is going to have to look for funding whether that means raising more debt or issuing shares which they might do given the fact that the stock has doubled over the past year might be a good time to sell stock but again that's going to be diluted to shareholders”

The analyst suggests that DraftKings faces a dilemma due to the rise of prediction markets like Kalshi, which operate in a 'gray market' in states where sports betting is not legalized. DraftKings must be cautious not to upset state regulators by entering these gray markets, as it could jeopardize their ability to obtain licenses for full sportsbooks in the future, which are currently a more profitable business model.

“So, this is this is where I think it it becomes an interesting question if you are DraftKings because you're seeing the market move and uh you're seeing that there is demand from consumers to have these uh access to these prediction markets.”

ARK identifies DraftKings as a leader in the rapidly growing mobile sports betting sector. They emphasize the importance of vertically integrated tech stacks, which they believe gives companies like DraftKings a significant advantage over competitors that outsource third-party solutions. The sector saw over $100 billion in gross betting volume in 2023 and is expected to continue growing as more states legalize.

“when we look at what separates companies operating in the mobile sports betting space we we focus on one key factor and that's vertically integrated Tech staxs as you can see on the chart on the right we are focused and looking at companies like DraftKings and FanDuel from a technology perspective we believe that their ability to focus on the backend Tech has given them a massive advantage.”

The speaker, a co-founder of DraftKings, expresses strong long-term conviction in the company's web3 strategy, particularly with its 'Rainmakers' NFT-driven fantasy sports product. He believes the product merges the appeal of fantasy sports with digital ownership and utility, creating a powerful engine for engagement and growth. The company's focus on building a sustainable, long-term business model, rather than short-term speculation, is highlighted as a key strength, especially in a bearish market.

“Good Times bad times whatever like the long-term conviction and what DraftKings is doing I think is uh it's always something that we've really valued and as a founder of course like Jason Paul and I talk all the time about you know there's endless amounts of people that like will jump in at the best of times and I thought our kids always been a great supporter and in all times you know of our company and I hope that that yields really great rewards in the future and yeah thanks for having me”

The YouTuber recommends buying DraftKings when its price drops to around $9-10, noting that it was once a $15 stock and has significant upside potential to $15, $17, and ultimately $20. He highlights that getting it at $10 and selling at $20 would double the investment.

“This going to come to $910. It's best when you buy it there. Okay, this is the your $15 winning play. It's best when you get it there cuz while it's here, you got, you know, it's going to 15, you know it's going to 17, and then the ultimate goal is 20.”

The YouTuber recommends DraftKings, citing the growth of sports and online gambling. He encourages viewers to invest in companies they use, positioning DraftKings as a company that will 'make some noise' in this sector.

“DraftKings. All right, with sports and online gambling, look for this one to make some noise.”

The YouTuber suggests DraftKings is a buy because it has recently broken out and has significant upside potential compared to other stocks at all-time highs. He believes the sports gambling industry is growing and DraftKings is well-positioned to benefit from this trend.

“DKNG finally broke out normally this the past few years this has been my dark hor meta is my Dark Horse this year this was normally my Dark Horse but I stopped playing it around a Super Bowl because the correlation has always been oh this is going to do good they always do earnings right after the Super Bowl but between me and you guys they always went down so after years and years of you just seeing it go down like okay I'mma back up off I like the stock and the company just in general not necessarily due to the Super Bowl so I backed off of it after the Super Bowl sure enough when coach backed off this one to take off okay so it took off in a manner that got coach's attention I need to now put this on your radar because some stocks that you guys know like and love are at alltime highs okay so they're reaching that ceiling they they can't go much higher these stocks are at a level where they're about to run they got all this Runway to catch some of these other stocks and that's what today's set of plays Will kind of illustrate for you guys okay so put DraftKings on your radar for me okay as one you want to pay attention to as one that's going to make a lot of money now the company is good sports gambling and sports betting and parlays let me know if you guys are into that as well okay that is coming that is here to stay and it's just only going to get better Draft Kings from a business perspective will be one of the beneficiaries of this new movement that is again taken the World by storm okay”

The YouTuber identifies DraftKings as another small-cap company to watch, noting its recent recovery. He suggests that if it breaks above $40, it could be 'off to the races' towards $45, offering significant gains.

“this one came down but it's making its way back to $40 okay and if it crack through 40 it's Off to the Races to $45”

The YouTuber advises buying DraftKings, citing the growth of online and sports betting. He believes the company will survive the test of time and become a major player, expecting its value to double within one to three years.

“Because I see sports betting and sports gambling so much bigger than we at today and once they get again their firm handle and defeat planted firmly in the game I can see them being one of the big dogs.”

The YouTuber recommends buying long-dated call options on DraftKings, noting its recent 8% drop to $40.75, which he views as a favorable entry point. He anticipates an explosive bounce for the stock within 1-3 months, driven by the market's current 'fear' sentiment.

“This is DraftKings ticker symbol DK n g sitting at $40.75 it was down 8% this one has been sitting up look at this this one been sitting at 45 for the longest okay so I'm finally F happy to see that it came down but same thing I'm done buying shares of this I already did the work now remember I told you guys I buy shares and I buy cars in all of my plays”

The YouTuber expects DraftKings to beat earnings again, leading to a parabolic move similar to Palantir or Meta. However, he anticipates a pre-earnings sell-off due to broader market conditions (CPI report) and advises buying on a pullback between $40 and $42 for the best entry point.

“I can see this coming down to 40 41 I wouldn't even be surprised if they was at 38 heading into two earnings and then they come to this level so write this down before I take you guys on this journey 41 write this down the market will be down potentially or this play at least will be down at some point throughout this week leading up into earnings you need to know that so you wouldn't look at this guys you wouldn't for SE get this February 16 you would buy a car but you wouldn't go for this 43 car sitting at 297 because this will be lower but they will very well be down here more around this $41 $40 range maybe even $39 but if they're down here this price will also be down so this won't be5 35 okay so I want you guys to be looking for a strike price between 40 and 42 if you guys get in it early on in the week okay be but you need to wait for a pullback you need to let the market crash on Monday or Tuesday or whatever I feel like it's going to do leading up to earnings that's going to get you your best entry”

The YouTuber suggests buying DraftKings for a potential 'double' next week, similar to a previous Palantir play. He frames it as a high-risk, high-reward options play, emphasizing the potential for significant percentage gains on a small capital allocation, especially around earnings season.

“this week we're going to do it again and we're going to do it uh with DraftKings okay that's going to be the play that I'm going to put on your radar for another potential opportunity like we did this past week.”

The YouTuber believes DraftKings will be a leading stock this week, noting its nearly 10% gain in the previous week. He suggests it's poised for further upward movement.

“I'm letting you guys know some stocks that will run this one will be leading the way.”

The YouTuber identifies DraftKings as a 'Dark Horse' opportunity, noting its strong year-to-date performance. He advises buying when the stock pulls back to the $26.90 level or below, as this price point has demonstrated strong support and a 'triple bottom' pattern. He suggests setting a limit buy order at this level to capitalize on bounces.

“I told you about my Dark Horse Draft Kings I think the whole entire industry sleeps on this particular play but I just wanted to show you and highlight them today the ticker symbol on this one is dkng they're sitting at $28 21 currently they were up $1 today or the equivalent of nearly 4% 3.95% to be exact and they're up another 2.5% in after hours and guys I always tell you about DraftKings okay so when you can catch it down here 26 24 you have to be thinking to yourself oh there's my opportunity okay check this out on the week it gave us some opportunities look at this triple bottom right here 2687 2690 and then 2690 okay that's letting you know that's establishing a firm bottom at that level so you need to say to yourself oh next time I see 26.90 or just go ahead and set a limit byy order at 26.90 is or or below all right so that you know you're getting it cuz that level is being respected and they're bouncing hard off of that and going back to the upside”

The YouTuber highlights DraftKings as a 'Dark Horse' stock with significant upside potential. They recommend buying if the stock pulls back to its support level around $28, expecting a quick ride up for a 4% move. The strategy emphasizes risk management by placing a stop loss just below the entry point.

“if you catch this one at support you just get in and you ride it up guys keep the game simple place your stop loss at where you get in at so if you get in at $28 your stop loss should be right underneath that just in case you're run wrong”

The YouTuber recommends accumulating DraftKings shares, especially when the stock is down, comparing a red day in the market to a sale. He notes its current price of $29.05 and identifies a triple bottom pattern, suggesting it's preparing for a takeoff. He also mentions specific lower price points ($24, $22, $20) where he would 'love' to buy more.

“DraftKings symbol dkng I told you guys everybody sleep on this one so I want to make sure the same game understands we like it here but we love it at 24 22 and 20 okay but it's never bad to accumulate dollar cost averages get a handful of shares at these levels it's currently sitting at 29.5 Cent it was down one percent on the day that's what got my attention I said oh oh we love a cell anytime we go into the mall and we see a sale buy one get one half off buy one get one free 50 off that's what a red Day means in the stock market this one wasn't fifty percent off it was one percent off that's what we like to see in the stock market okay go shopping look at this triple bottom right here guys one two three lower high right here preparing for takeoff okay identify these patterns guys it'll change your life okay when you start seeing this understanding this and slowing the game down keep your eye on this one for tomorrow for me okay”

The YouTuber identifies DraftKings as a 'dark horse' stock, noting its strong performance (up nearly 13% in three months, 150%+ year-to-date). He recommends accumulating shares if the price drops to $28, or ideally even lower at $24, $22, or $20, viewing current levels as the higher end of the accumulation range.

“if you guys can see a 28 handle ideally 24 even better than that 22 or 20. guys those are the ranges you want to accumulate in this again will be towards the higher end of the range”

The YouTuber has DraftKings on his radar and plans to start a smaller position if it drops to the $27 range, with larger buys if it reaches $24 or below. He considers the current price under $30 still a bit high for significant accumulation.

“DraftKings another one dkng is a ticker symbol on that one sitting under thirty dollars now still this is a little too high but it's on my radar... if this comes down to this level the 27 range I may start a smaller position all right I already got a position in this but my point is I'll have smaller buys and bigger buys will happen at 24 and Below”

The YouTuber recommends DraftKings, highlighting its strong growth in the US market, with 30%+ revenue growth expected to accelerate. The stock is considered a 'rare mix of strong growth and cheap valuation' at 4.4 times price-to-sales, which is below its average. The company's focus on the faster-growing US market gives it an advantage over competitors with more international exposure.

“DraftKings is priced at about 4.4 times on a price to sales basis 10% below its average over the last four quarters so this is that rare mix of strong growth and cheap valuation”

DraftKings has a $1.1 billion convertible note due in 2028 with a conversion price far above its current stock price. The company is still unprofitable and has consistently negative operating and free cash flow, making it unable to afford refinancing at higher rates or diluting shareholders, which would severely impact the stock price.

“Cash flow statement is just a nightmare if you look at the cash flow look at the operating cash flow it's never been positive here negative 315 million just over the last 12 months.”

The YouTuber is holding DraftKings for the long term due to the massive growth potential in online sports betting, especially as more states legalize it. DraftKings holds a significant market share and is showing strong growth in both monthly unique payers and average revenue per payer.

“I'm holding this longer term I think it really grows into the industry as well as becomes more efficient in the company itself really boosting that stock price”

The YouTuber considers DraftKings a 'forever stock' due to the significant growth potential in the sports betting market, which is still expanding into new states. Despite not being profitable yet and trading expensively, its market control and long-term growth prospects make it a buy on dips.

“Sports betting is still in just 38 States and missing the big growth drivers in States like California and Florida so lots of growth still left in this market DraftKings controls 27% of the that market and should continue to grow with that legalization.”

The YouTuber recommends DraftKings, emphasizing its significant growth runway as online sports betting and iGaming expand across the US. He highlights the company's dominance in existing markets, strong revenue growth, increasing monthly players, and rising average revenue per player, indicating both scale and profitability improvements.

“Not only does the company have a huge runway in states that have yet to legalize online Sports bedding but still has expansion into six additional states that already have legalized betting where it's already present.”

The YouTuber is buying DraftKings, which is already in his portfolio, due to its commanding lead in the sports betting and online gambling market. He highlights its expected 58% revenue growth this year as it expands into more states and services, seeing the recent 13% pullback as an opportunity.

“DraftKings ticker dkng also already a part of my portfolio holds a commanding lead in that sports betting and online gambling about 20 25 of that market.”

The YouTuber suggests buying DraftKings regularly, citing its significant growth potential as it expands into more states for online sports betting and iGaming. He notes its dominance in existing markets (20-30% share) and strong revenue growth (84% YoY), along with increasing average revenue per player. While acknowledging its current unprofitability and high price-to-sales ratio (5x), he believes the long-term market opportunity could lead to substantial profit growth.

“Not only does the company have a huge Runway into states that have yet to legalize online sports betting but still has expansion into those six additional states with legalized betting where it isn't yet present.”

The YouTuber owns DraftKings shares and is long-term positive on the stock, but expresses nervousness about its recent 98% surge ahead of earnings. He has covered his shares with call options at a $25 strike price to lower risk while still participating in upside up to that level, believing the downside risk of disappointment is currently larger than the upside potential.

“I again I do own the shares I own the shares that will cost base is about 12 here from last year I'm a long-term positive on this but these big runs ahead of earnings always make me nervous.”

The YouTuber suggests buying DraftKings, noting its significant price drop makes it an attractive investment. He emphasizes the substantial growth potential in the legal sports betting market, with more states legalizing it, and highlights DraftKings' aggressive expansion and increasing user engagement and revenue per player.

“DraftKings has been hammered over the last year down more than 70 percent but it has one key criteria for investment that I'm going to show you later one key that means that this is the investment you want to make now while everyone else is selling.”

The YouTuber is bullish on DraftKings, despite its significant drop from its peak and expected near-term losses. He believes the company, as a leader in a growing industry, will 'grow out of its problems' due to rapid sales growth and the potential for more states to legalize online gambling, including large markets like California and Texas.

“DraftKings ticker dkng is going to also report its earnings here on Thursday with the stock down 73 from its pandemic Peak uh this the earnings loss is expected to narrow to 59 cents a share this quarter but is still expected to to post negative earnings for the next really the next couple of years but it's growing sales by 68 a year so I do believe this one is going to grow out of those problems DraftKings is the leader in a growing industry several large states have yet to approve online gambling we still have California and Texas to approve online gambling sometime Florida is getting closed captioning not available mid last year to a six and a half percent last month that has supported this idea this hope but that rally is going to need that inflation to keep on weakening that inflation rate to keep on coming down if it's going to be if it's going to continue to drive stocks higher.”

The YouTuber suggests buying DraftKings, noting its significant sell-off (78% from its peak) has brought its valuation to a more attractive 4.5 times sales. He believes the company is well-positioned for growth in online gambling and gaming, especially after a strong Super Bowl betting season. While acknowledging potential for further drops, he sees it as a great long-term stock at current valuations.

“stock is trading relatively cheap though at four and a half times sales I think this is one of the best positioned for that increase in online gambling and gaming so you know I would be buying the shares here”

DraftKings is included in the 'super ETF' as a notable holding from the ARK Next Generation Internet ETF, aligning with themes like cloud computing, e-commerce, and AI.

“so we'll add twilio ticker twlo and draftkings ticker dkng to our list”