What Happened?
Shares of fantasy sports and betting company DraftKings (NASDAQ: DKNG) jumped 1.9% in the morning session after a company director, Harry Sloan, disclosed a significant purchase of company stock valued at $757,500. The transaction involved 25,000 shares bought at a weighted average price of $30.30. Such a substantial purchase by an insider was often viewed by investors as a signal of confidence in the company's future prospects. Following the purchase, Sloan's direct ownership in DraftKings increased to 249,712 shares. Adding to the positive sentiment, analysts at Stifel Nicolaus reiterated their "buy" rating on the stock. However, the firm did lower its price objective to $46.00 from a previous target of $50.00.
After the initial pop the shares cooled down to $31.40, up 3% from previous close.
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What Is The Market Telling Us
DraftKings’s shares are very volatile and have had 21 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 previous big move we wrote about was 8 days ago when the stock dropped 5.2% on the news that Bank of America downgraded the stock to Neutral from Buy and BMO Capital also lowered its price target. BofA analyst Shaun Kelley cut the firm's price target on the shares to $35 from $48, citing several concerns. These included sports outcomes that raised questions about volatility and long-term earnings, the company's underperformance in iGaming, and potential state-level tax headwinds. The analyst also pointed to prediction markets as a near-term challenge. Unfavorable sports outcomes meant that bettors were winning more than usual, putting pressure on profits. Adding to the negative sentiment, BMO Capital lowered its price target to $63 from $65, also pointing to unfavorable sports results in September. BMO reduced its third-quarter revenue estimate for the company as a result.
DraftKings is down 13.5% since the beginning of the year, and at $31.40 per share, it is trading 41.3% 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 $761.12.
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