After Recent Fumbles, DraftKings Could Be in the Running Again

Football season has returned. Some will become weekend widows (and widowers) as their partner disappears into a pigskin black hole, beginning early Saturday and well into late night Sunday.

Monday night and Thursday night disappearances are not out of the question.

A big benefactor here may be DraftKings DKNG. People stateside love to bet on football, and states are opening their arms to embrace in-game betting and DFS (Daily Sports Fantasy), which offers DKNG a chance to onboard new customers. The ultimate goal is to push these players to the casino games, but enticing them into the app with boosters and promos comes easy with football.

After an earnings call misstep of announcing a surcharge on winnings in states where corporate gambling taxes were raised, DKNG walked back that policy after its competition did not follow suit with a surcharge. That policy reversal pulled DKNG off its recent bottom, resolving a major fumble.

One other issue remains: the company’s foray into non-fungible tokens via its Reignmakers game. That product was killed virtually overnight a little more than a month ago. DKNG offered payouts to all its players, but it will likely still face lawsuits from the biggest Reignmakers players. The NFLPA will also likely want its pound of flesh since the NFL NFT game was the biggest part of Reignmakers. None of this will look great from a PR perspective, but it will hardly be more than a small hiccup compared to DKNG’s revenue.

Although DKNG has enjoyed an August bounce off the lows, the stock has been in a rounding consolidation pattern over the past two weeks. The dip to $33 offers a clear stop price range of $33 to $34. A close over $37 presents a breakout opportunity with an upside target of $40 to $41. I would not be surprised to see it trade between $35 and $37 for a few days to complete the handle portion of a cup-and-handle pattern; however, I will be watching for a close over $37 and some volume to come into the stock to look for a long side trade with a target of $41 and stop below $34.

At the time of publication, Byrne had no positions in any securities mentioned.