In This Article:
What Happened?
Shares of fantasy sports and betting company DraftKings (NASDAQ:DKNG) fell 7% in the morning session after the state of Illinois announced new legislation that introduces additional fees for online sports betting operators. The new fee structure is expected to significantly increase the tax rate for major players like DraftKings in Illinois, potentially reducing their profitability.
The shares closed the day at $33.73, down 6% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy DraftKings? Access our full analysis report here, it’s free.
What The Market Is Telling Us
DraftKings’s shares are quite volatile and have had 19 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago when the stock gained 14.3% on the news that the company reported strong fourth-quarter results, which blew past analysts' EPS and EBITDA expectations.
Looking ahead, it slightly lifted its full-year revenue guidance, beating analysts estimates', while EBITDA outlook for the same period was roughly in line.
On the other hand, revenue missed expectations by a whisker as average revenue per user dropped 16%, primarily due to lower spending from Jackpocket users and a lower sportsbook hold rate. This dynamic played into earnings, as GAAP operating margin fell. Still, this was a decent quarter with key positives.
DraftKings is down 7.1% since the beginning of the year, and at $33.72 per share, it is trading 37% below its 52-week high of $53.49 from February 2025. Investors who bought $1,000 worth of DraftKings’s shares 5 years ago would now be looking at an investment worth $817.06.
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