DraftKings stock rises despite Wells Fargo downgrade

DraftKings (DKNG.US) stock erased premarket losses and jumped nearly 4% higher on Tuesday, despite the fact Wells Fargo downgraded the sports betting company to “equal weight” from “overweight” and lowered its price target to $19 per share from $41 saying rising costs are going to weigh heavily. 

• “Our downgrade is company specific and reflects our growing concern on DraftKings’ path to profitability given its fast-growing operating expenses. DraftKings’ implied 2022 operating expenditure will increase 60%+ year-on-year versus its expected around 49% revenue growth,” analyst Daniel Politzer said in a note, according to StreetInsider.
• Sales and marketing expenses during the year almost doubled to $ 982 million, but the number of unique customers paying monthly on the platform increased by only 32% to around 2 million.
• DraftKings is expected to improve its profits in the future, although it will be difficult for the company to achieve positive full-year EBITDA before 2025.

DraftKings (DKNG.US) stock plunged more than 21.0% on Friday following its quarterly report and today buyers attempt to recover some of the recent losses. The nearest support can be found at $11.00 where 2020 lows are located, while buyers may focus on the resistance at $25.00 which coincides with 78.6% Fibonacci retracement of the upward wave launched in March 2020, 50 SMA (green line) and upper limit of the wedge formation. Source: xStation5