Oppenheimer's Bullish Call On Draftkings Was A Week Too Early
DraftKings is a digital sports entertainment and gaming company created to fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming and digital media. DraftKings is the only U.S.-based vertically integrated sports betting operator.
DraftKings provides users with daily sports, sports betting, and iGaming opportunities. It is also involved the design and development of sports betting and casino gaming platform software for online and retail sportsbook, and casino gaming products.
One month ago, DraftKings and Disney's (DIS) ESPN announced a multiyear agreement to become a "co-exclusive" sportsbook link-out provider and exclusive daily fantasy sports provider of media giant Disney immediately connecting fans to DraftKings' products and services. On the news the Smart Money bought up call options at the strike price at $65 and $70 that expired this past Friday.
But then the stock sold off, due to COVID-19 jeopardizing the baseball and football season. For example, he Tennessee Titans suffered an outbreak in which 20 players tested positive a couple of weeks ago. The selloff was also due to DraftKings selling 32 million shares for a total offering size of nearly $1.7 billion.
Because of the selloff, Oppenheimer announced that it was a buying opportunity.
Shares of DraftKings Inc. surged 3.1% in premarket trading Monday, putting them on track to snap a 5-day losing streak, after Oppenheimer analyst Jed Kelly raised his price target, and said he believes the recent weakness has created "a compelling buying opportunity." The stock plunged 23.5% over the past five sessions, after the fantasy sports and online betting site launched a 32 million share offering.
Kelly rose his target to $65 from $55, while reiterating his outperform rating. "We believe the raise strengthens [DraftKing's] position in growing the legalized US sports-wagering/iGaming markets and are expecting the company to leverage its paid-marketing competencies and be aggressive on [customer acquisition costs]," Kelly wrote in a note to clients.
But the call was too early. Meaning price had not gone down enough where the buyers were willing to step in and buy the stock.
In recent news, DraftKings and Turner Sports have entered into a multi-year agreement making the digital sports entertainment and gaming company the exclusive sportsbook and daily fantasy sports provider across select Turner Sports and Bleacher Report properties.
Price is now at a level where the buyers are willing to step in and buy price...at the daily demand at $41.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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