DraftKings Inc. (NASDAQ: DKNG) experienced a notable rebound in premarket trading on Wednesday following an intra-day fall to its lowest stock price in the past year. During Tuesday's regular session, shares dropped to $25.72, marking the 52-week low for the gambling and sports betting company. However, this decline was followed by a recovery in after-hours and premarket trading sessions, indicating some immediate investor interest in the stock at lower valuations.
Pressure on DraftKings shares stems in part from recent developments on the regulatory front. The Commodity Futures Trading Commission (CFTC) announced plans to establish clearer regulatory guidelines for prediction markets. Specifically, the CFTC withdrew a prior proposal which had prohibited contracts based on sports and political events. Such regulatory shifts complicate the landscape for DraftKings' product offerings, which are often impacted by state-specific gaming licenses and taxation.
At the same time, DraftKings encounters intensifying competition from other online services entering the sports event contract space. Robinhood Markets Inc. (NASDAQ: HOOD), through its collaboration with Kalshi, has integrated sports event contracts within its brokerage app. Robinhood has reportedly processed more than 11 billion contracts, generating close to $100 million in annual revenue from these prediction markets. These contracts can be priced in minimal increments, such as one cent, and can be freely traded before the resolution of the underlying event, allowing for increased liquidity and potentially lower costs for consumers.
DraftKings, operating under a patchwork of state licenses and associated tax structures, is unable to match the pricing and scalability of Robinhood's CFTC-regulated national products. This puts the company at a disadvantage in attracting traders who seek low-cost, flexible betting instruments. Moreover, the National Football League (NFL) has listed prediction markets among prohibited advertising categories for the upcoming Super Bowl LX, alongside tobacco and firearms. Despite this ban, it is anticipated that sports betting firms, including DraftKings, will maintain advertising presence during the February 8th game.
From a technical analysis perspective, DraftKings is exhibiting bearish trends. The stock is trading 14.6% below its 20-day simple moving average (SMA) and 20% beneath its 100-day SMA, signs of downward momentum in both short-term and medium-term frames. Over the past year, shares have declined by approximately 35.90%, positioning closer to the lower bound of the 52-week trading range. The relative strength index (RSI), at 25.09, indicates an oversold market condition, while the moving average convergence divergence (MACD) remains below its signal line, adding to bearish signals. This mix of momentum indicators suggests the stock faces near-term pressure but may also be due for a technical rebound.
Key technical support is identified near $26.00, with resistance observed around $32.00. Investors are closely monitoring these levels in anticipation of possible breakout or further declines.
Looking ahead, DraftKings is scheduled to release its next quarterly earnings report on February 12. Consensus estimates project earnings per share (EPS) of 36 cents, an increase from 14 cents reported in the previous year. Revenue forecasts anticipate $1.98 billion, up from $1.39 billion in the prior period, reflecting expectations for continued top-line growth amidst industry challenges and evolving market dynamics.
Analyst sentiment remains generally positive, with the stock carrying a Buy rating and an average price target of $49.12. Recent adjustments by brokerage firms include Canaccord Genuity setting a target of $50.00 on February 3, Stifel targeting $44.00 as of January 30, and Guggenheim reducing their price target to $42.00 on January 29. Such revisions suggest cautious optimism balanced with recognition of prevailing market headwinds.
DraftKings shares were up 2.28% to $27.37 in Wednesday morning premarket trading, reflecting investor response to the recent low point and upcoming earnings news. This fluctuation spotlights ongoing market uncertainty, influenced by regulatory developments, competitive pressures, and technical factors.