Shares of a North American betting company DraftKings (NASDAQ: DKNG) continue to slip as the bookmaker’s operator fails to gain momentum ahead of the final stretch of the NFL season. Sports betting stocks have traditionally benefited from these high-profile sporting events, but despite the action on the ground and the constant expansion of legislation, investors seem to be betting “under” when it comes to brand stock value.
Now, DraftKings shares are down more than 64% from their all-time high and are trading at a 52-week low of $22.64. This is a significant reduction from the $74.38 price that the brand advertised just before last year’s March Madness tournament.
The record high in March ended a positive momentum that began with the start of the 2020 NFL season, when stock prices soared with the start of NFL post-season action this season.
While many gambling investors hoped the trend would return, the Wall Street darling of sports betting failed to gain momentum.
Another factor is adding to concerns as the launch of online betting in New York has failed to revive the struggling sector. Since Empire State has been accepting online bets for a week now, DraftKings investors were hoping to see at least some uplift after entering a new market with 19.5 million people.
While the new jurisdiction failed to provide immediate relief to shareholders, the weekend and market share updates could turn the tide in DraftKings’ favor.
We’ve discussed the DraftKings’ financial woes at length, as their overspending habit has led to less than impressive quarterly earnings. These marketing and acquisition spending have increased significantly, with the $400 million spent by the brand in the first half of 2021 almost matching the $500 million spent by the brand in all of 2020.
Of course, revenue was up, but data as of September 30 showed that DraftKings lost more than $1.2 billion in the first nine months of the year. That figure is more than double the $574 million the sports betting operator earned in the same period last year.
These figures indicate that many investors in gambling stocks have become more cautious about the brand. While it is clear that the sports betting industry is poised to generate more profits in the future, the lopsided financials are not encouraging today’s investors.
Note, however, that the bottom does indeed exist and DraftKings stock could reverse the current trend and create a long-term positive upside. Let the lack of market reaction to the New York stock launch be a sign that the stock has bottomed out. High tax rates and operating costs seem to have deterred new investors, but one positive story is enough to turn the tale around.