Strong Growth Trends Bode Well for this New Digital Sector

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  • The past few years has seen the rise of entirely new businesses online. Areas such as e-Sports are overtaking physical sports in terms of value and customer interest. That’s also true with sports gambling, which, thanks to some legal changes, is now widely available online.

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  • The big player in that space is DraftKings (DKNG). The company went public last year via a SPAC and was an early winner in that way of going public.

    Like many SPAC and post-SPAC companies, however, shares have fallen on hard times. The company has lost 25 percent of its value since March. And that’s in spite of the company’s growing income as in-person sporting events have resumed.

    That’s leading to a few buy ratings for the company. More importantly, shares are nearing a resistance point near $55 per share. They may bounce off of there in the coming days. If not, shares may drop another 10 percent from here to $50 per share, right at the company’s 200-day moving average.

    In short, a fast-growing industry and a growing company are out of favor with the market—and the charts are starting to point to a possible bounce in the near term.

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  • Action to take: Shares are worth buying near here, as daily volatility could easily lead to a quick 10-15 percent bounce, if not more, simply from share coming off of oversold levels.

    The August $60 calls, last going for about $5.80, could leverage a short-term bounce in shares into a high double-digit return.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, and does not intend to make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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