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When an issue falls out of favor with Wall Street, it's extremely hard to turn the tide even with an earnings beat and raised guidance. This scenario applies to DraftKings (NASDAQ:DKNG).
What A Year: DraftKings had the fortune of being one of the early SPACs to transitions into a publicly-traded company. In addition, when the investors were looking for bargains following the March 2020 meltdown, DraftKings was a low-priced issue with a sexy story: gambling.
DraftKings just happened to be in the area where most SPACS begin trading ($10) when it bottomed last March at $10.60. It fully participated in the major rally off the low and it continued this year. However, it peaked this March at $74.38 and has been unable to recover.
Street Bearish Into Q4 Report: Only eight sessions ago (April 27), the issue had an intraday high of $62.37, but weakened to close at $59.13. Since that day, it has only has had two green days: one the following day of $0.56 and on Wednesday of only a nickel.
It was held in at the $56 area when it was taken out to the woodshed on Thursday, falling from $56.18 to $51.69 as the entire gaming sector was under selling pressure.
Q4 Beat, Who Cares? Before the open on Friday, the company announced reported quarterly sales of $312 million, which beat the analyst consensus estimate of $230.68 million.
In addition, the company raised 2021 sales guidance from $900 million-$1 billion To $1.05 billion-$1.15 billion versus a $1.05 billion estimate.
Higher Open Faded And Hard: After a strong open, the issue moved another $0.06 to $53.51 and sharply reversed course.
That high was over $2 lower than Thursday’s high ($55.62). Sellers pressed the issue lower and easily breached the former low of the move from Thursday ($50.25) and attempted to rebound and remain in the $50 handle.
However, another wave of sellers nudged the issue $48.16. The current low coincides with its Jan. 6 low ($47.92). Underneath that low is pair of lows in the lower $44 handle. The Jan. 4 low ($44.50) and its yearly low from January 5 ($44.10).
The stock closed Friday at $48.42.
Moving Forward: With the overhead supply of sellers increasing by the day, it's hard to precinct if and when the issue will be able to rebound. Especially, with what could have been a positive catalyst, a good earnings report, did not instigate a rally.
Also, with the weak price action, the host of Wall Street analysts with Buy ratings may decide to pull some chips off the table with a downgrade and or price target reduction.