Why the DKNG Weekly
Options Trade was Executed?…..
(NASDAQ: DKNG), the
sports-betting company, has seen plenty of momentum in 2023 as traction grows
in newly-added states. Year to date, the stock has more than doubled - yet even
so, there's still plenty of room for upside left.
The company's growth in active users has been driven by new state
legalizations - at one point, the market had feared that DraftKings'
pandemic-era uptick in monthly gamers and overall betting activity was due to
COVID shutdowns and bored consumers making bets at home - now, however, that
increased activity levels are organic and have been sustained. Also in
DraftKings' favor is the fact that it has reduced marketing spend and improved
gross margins, without materially impacting its growth rates.
The DKNG Weekly
Options Trade Explained.....
** OPTION TRADE: Buy DKNG JUL 28 2023 25.000 CALLS - price at last close was $1.66 - adjust accordingly.
Obviously the results will vary from trader to trader
depending on entry cost and exit price that was undertaken.
Entered the DKNG Weekly Options (CALL) Trade on Tuesday, June 27,
2023 for $1.67.
Sold half the DKNG Weekly Options contracts on Thursday, June 29, 2023,
for $2.58; a
potential profit of 54%.
Holding the remaining DKNG weekly options contracts
for further profit before expiry.
Don’t miss out on further trades – become a
Inc. is a digital sports entertainment and gaming company serving industry and
gamers alike. The company offers multi-channel sports betting and gaming
technologies that are used by sports and gaming entertainment operators in 17
countries. In the U.S., the company operates iGaming through its DraftKings
brand in 5 states, as well as operates Golden Nugget Online Gaming, an iGaming
product and gaming brand in 3 states.
is headquartered in Boston, Massachusetts, and is the only vertically
integrated online gambling platform headquartered in the US and targeting US
gamers. The company was founded in 2011 by three close friends and went public
in 2020 with a listing on the NASDAQ stock exchange. The initial offering is
noteworthy because the company went public via merger with a SPAC formerly
known as Diamond Eagle Acquisition Company.
is run by Jason Robins, Matt Kalish, and Paul Liberman. The three started as
friends but turned into cofounders, entrepreneurs, and corporate executives.
Robins is CEO and in charge of corporate operations while Kalish and Liberman
are president of DraftKings North America and Global Technology and Product
respectively. Together, they manage a team of 10 executives and a network of 14
locations including 8 outside the US.
began as a dream to improve fantasy sports leagues. The goal was to change the
way fantasy sports were played and open the door to a host of new gaming
opportunities. The product was first launched in 2012 and now the company’s
daily fantasy sports product is available in 6 countries internationally with
15 distinct sports categories.
itself apart from the average fantasy sports provider by not only offering the
widest selection of sports but the most control for the players. Players can
re-draft new line-ups at will for most sports and there are daily contests
within each league. The idea is for players to have a chance to win on a
seasonal, quarterly, monthly, weekly, and daily basis.
Sportsbook is live with mobile and/or retail betting operations in the United
States pursuant to regulations in 18 states. The Sportsbook connects sports
fans with legal sports betting operations in states with legalized gambling.
expanded its offering with the launch of DraftKings Casino. DraftKings Casino
is home to all the favorite table and slot-machine games but in a digital format.
The Casino games are available on desktop and mobile like all of DraftKings
offerings making them easily accessible to players.
to gaming and sports betting, DraftKings is banking on the cryptocurrency
revolution with DraftKings Marketplace. DraftKings Marketplace is a digital
collectibles ecosystem designed for easy use that offers curated NFT drops and
SPAC merger included the addition of SBTech, a sports betting technology
platform. DraftKings sports betting and casino technologies are available as a
white-lable for businesses through this platform. SBTech offers an end-to-end
solution including the gaming platforms and back-office services.
also owns Vegas Sports Information Network (VSiN), a multi-platform broadcast
and content company. Vegas Sports Information company can be accessed online or
screened on live TV featuring world-renown sports commentators, players, and
Further Catalysts for the DKNG Weekly Options Trade…..
for DraftKings picked up steam after the company released Q1 earnings and
updated its outlook for the year.
revenue surged 84% y/y to $769.7 million, dramatically beating Wall Street's
expectations of $697.5 million (+67% y/y) by a huge seventeen-point margin.
Revenue growth also accelerated versus 81% y/y in Q4. In a macro climate
where most companies, especially tech companies, are reporting recession-driven
deceleration, it's especially encouraging to see that DraftKings is virtually
seeing no impact at all.
quarter's strength was driven in part by early-2023 launches in Ohio and
Massachusetts. Since launching in January and March in these states,
respectively, DraftKings has attracted 7% and 6% of these states' total adult
populations onto its platform.
recent trends has pushed DraftKings to boost its full-year guidance to $3.185
billion in revenue (+42% y/y) and -$315 million in adjusted EBITDA; the latter
being a 21% reduction in loss expectations for the year. This was driven by a
combination of factors including improved hold rates, Q1 sports outcomes that
favored the house (DraftKings), and most importantly, much better player
acquisition costs in the first quarter declined -27% y/y (while new customers
still grew 57% y/y), which helped DraftKings bring its pro forma gross margins
up by six points y/y to 38%.
turn, has helped to slim down DraftKings' adjusted EBITDA losses by ~23% y/y.
focus has turned to profitability and efficiency, and the company expects to
generate $150 million in adjusted EBITDA profit in the fourth quarter of this
year - a huge turnaround from current levels.
“At the same
time, achieving efficiency remains a relentless focus. Our mantra of revenue
growth and cost efficiency is gaining even more momentum throughout the
organization. Due to both our strong revenue growth and our ongoing efforts to
capture efficiencies, primarily within external marketing and our fixed costs,
we are on the cusp of achieving profitability on an adjusted EBITDA basis. We
expect to be approximately breakeven on an adjusted EBITDA basis in the second
quarter, and we expect to achieve nearly $150 million of positive adjusted EBITDA
in the fourth quarter. For the full year, we are improving our adjusted EBITDA
guidance to a range of negative $290 million to negative $340 million or an
increase of 21% at the midpoint versus our February full year guidance."
2022, DraftKings landed its "white whale" among state legalizations -
New York State. Now, the company's sports betting is live in 42% of the U.S.
population. Other major states like California and Texas are still major
holdouts. The key observations here: A) the benefits from the New York launch
still haven't impacted DraftKings' financials yet, and B) more momentum is
underfoot, with 12 states representing an additional 24% of the U.S. having
open bills for legalization in upcoming elections.
it's already a known national brand with fantasy sports operations live in most
states, DraftKings isn't starting from scratch every single time it launches in
a new state. Data from recent state launches shows that sign-ups and betting
activity immediately ramp from the time DraftKings launches.
has something for everyone. Though anchored by big sports like football,
DraftKings also has other sports, including golf, NASCAR, basketball, and MMA.
DraftKings also has fantasy formats as well as direct online sports betting
where legal, as well as offerings in casino gaming.
DraftKings has designs on diversifying itself beyond simply sports.
Through acquisitions, the company is now a casino gaming operator, and its new
marketplace business has tossed DraftKings into the high-growth arena of NFTs.
DraftKings notes that recent NFT offerings have been over-subscribed.
Wall Street analysts have given positive ratings to DraftKings following
its strong quarterly performance. In June, BTIG Research and Jefferies
Financial Group raised their price targets for the stock to $31 and $35,
respectively. The recent price target raise is given by Wells Fargo. On June 23, Wells Fargo increased the price
target for DraftKings from $24 to $28. The stock's closing price on June 23 was
$25.03; thus, with a new target price of $28, it has an upside potential of
In its Q1 2023 investor letter, Baron Funds, an asset management firm,
highlighted a few stocks and DraftKings was one of them. Here is what the fund
“We re-initiated a position in former Fund holding DraftKings Inc.
(NASDAQ:DKNG), a leading online sportsbook, digital casino, and daily fantasy
sports operator. DraftKings’ mobile applications offer consumers the ability to
wager on a wide variety of sporting events and play hundreds of real-money
casino games. The company has spent the past three years building a proprietary
technology stack that improves the customer experience and delivers
best-in-class breadth of bet types (such as parlays, same-game parlays, and
player props). State-level online sports betting (OSB) and iCasino legalization,
along with a multi-year consumer adoption timeline in active states, has
supported a 90% revenue growth rate for DraftKings since 2020. The opportunity
for OSB legalization remains significant, with under 50% of the U.S. population
currently having legal mobile sports betting. We expect 65% to 80% of the
population will eventually have access to OSB. ICasino is currently legal in
just seven states representing roughly 13% of the population. ICasino product
adoption in legalized states has been robust, with the average user spending
twice as much as a sports bettor. While the pace of legalization for iCasino
has been slower, we believe additional states will pass regulation in the
As U.S. states began to legalize sports betting, the DraftKings
management team moved quickly to build widespread brand awareness. DraftKings
is the #2 operator in both OSB and iCasino by a wide margin, and has
demonstrated improving market share trends across almost all states. When a new
state legalizes sports betting, DraftKings has a first mover advantage as many
of its customers are converted from the DraftKings daily fantasy sports
offering. The quality of their sportsbook product along with increasingly
targeted promotional spending results in strong customer retention and high
lifetime values. In states where iCasino is legal, DraftKings can cross-sell
OSB customers. DraftKings’ scale and product advantages are creating a flywheel
that will enable the company to continue to out-invest the competition in acquisition
marketing, retention, and research and development. The high barriers to entry
are resulting in a consolidated industry that will eventually lead to a highly
profitable business. This is evidenced by older-vintage state contribution
margins that are already approaching 40%. Longer term, we believe DraftKings
can generate EBITDA margins between 20% and 30% with strong free-cash-flow
to the issued ratings of 29 analysts in the last year, the consensus rating for
DraftKings stock is Hold based on the current 5 sell ratings, 7 hold ratings
and 17 buy ratings for DKNG. The average twelve-month price prediction for
DraftKings is $25.52 with a high price target of $36.00 and a low price target
DraftKings' renewed focus on
profitability, its ability to dramatically grow active players and revenue
while also reducing customer acquisition costs, and the momentum it has with
additional state legalizations are all reasons to continue banking on upside
DraftKings has a 50 day moving
average of $23.69 and a 200 day moving average of $18.75. The stock has a
market cap of $21.53 billion, a P/E ratio of -8.68 and a beta of 1.80.
DraftKings has a 12 month low of $10.69 and a 12 month high of $26.65. The
company has a current ratio of 1.47, a quick ratio of 1.47 and a debt-to-equity
ratio of 1.23.