DraftKings (DKNG) Stock Slides as Market Rises: Facts to Know Before You Trade

In the latest trading session, DraftKings (DKNG) closed at $42.24, marking a -1.17% move from the previous day. The stock fell short of the S&P 500, which registered a gain of 0.8% for the day. Elsewhere, the Dow saw an upswing of 0.94%, while the tech-heavy Nasdaq appreciated by 0.97%.

The company's stock has climbed by 22.05% in the past month, exceeding the Consumer Discretionary sector's gain of 4.49% and the S&P 500's gain of 5.12%.

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The investment community will be closely monitoring the performance of DraftKings in its forthcoming earnings report. The company is forecasted to report an EPS of $0.4, showcasing a 233.33% upward movement from the corresponding quarter of the prior year. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.38 billion, up 25.37% from the year-ago period.

Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $1.36 per share and revenue of $6.27 billion, indicating changes of +229.52% and +31.46%, respectively, compared to the previous year.

Any recent changes to analyst estimates for DraftKings should also be noted by investors. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 6.67% lower. DraftKings is holding a Zacks Rank of #3 (Hold) right now.

In the context of valuation, DraftKings is at present trading with a Forward P/E ratio of 31.54. Its industry sports an average Forward P/E of 19.85, so one might conclude that DraftKings is trading at a premium comparatively.

Also, we should mention that DKNG has a PEG ratio of 0.6. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. As the market closed yesterday, the Gaming industry was having an average PEG ratio of 1.6.

The Gaming industry is part of the Consumer Discretionary sector. This industry currently has a Zacks Industry Rank of 96, which puts it in the top 40% of all 250+ industries.

The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Don't forget to use Zacks.com to keep track of all these stock-moving metrics, and others, in the upcoming trading sessions.

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This article originally published on Zacks Investment Research (zacks.com).

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