Should You Buy DKNG Stock At $35?
DraftKings (NASDAQ:DKNG), a leading digital sports entertainment and gaming company, has seen its stock fall 12% in a month, amid the selloff in broader markets owing to the Trump’s imposition of tariffs on its trading partners and the escalating trade war between the U.S. and China. Our take on market crash risk right now has more details on tariffs and its impact on the broader market.
We believe DraftKings stock, currently priced at $34, presents a good buying opportunity. Our analysis indicates that the company’s moderate valuation adequately reflects any minor concerns, especially when considering its strong operating performance and solid financial condition. We reached this conclusion by comparing DKNG’s current valuation against its recent operating performance and overall financial health, both historically and currently. This assessment, detailed below, examines key parameters such as Growth, Profitability, Financial Stability, and Downturn Resilience, all of which demonstrate the company’s underlying strength.
How Does DraftKings’ Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, DKNG stock is currently valued in line with the broader market.
• DraftKings has a price-to-sales (P/S) ratio of 3.4 vs. a figure of 3.2 for the S&P 500
How Have DraftKings’ Revenues Grown Over Recent Years?
DraftKings’ Revenues have grown considerably over recent years.
• DraftKings has seen its top line grow at an average rate of 55.5% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 30.1% from $3.7 Bil to $4.8 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 13.2% to $1.4 Bil in the most recent quarter from $1.2 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is DraftKings?
DraftKings’ profit margins are much worse than most companies in the Trefis coverage universe.
• DraftKings’ Operating Income over the last four quarters was $-609 Mil, which represents a very poor Operating Margin of -12.8% (vs. 13.0% for S&P 500)
• DraftKings’ Operating Cash Flow (OCF) over this period was $418 Mil, pointing to a moderate OCF-to-Sales Ratio of 8.8% (vs. 15.7% for S&P 500)
Does DraftKings Look Financially Stable?
DraftKings’ balance sheet looks strong.
• DraftKings’ Debt figure was $1.3 Bil at the end of the most recent quarter, while its market capitalization is $16 Bil (as of 4/7/2025). This implies a strong Debt-to-Equity Ratio of 8.2% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $788 Mil of the $4.3 Bil in Total Assets for DraftKings. This yields a strong Cash-to-Assets Ratio of 18.4% (vs. 14.8% for S&P 500)
How Resilient Is DKNG Stock During A Downturn?
DKNG stock has seen an impact that was slightly better than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• DKNG stock fell 85.7% from a high of $71.98 on 19 March 2021 to $10.27 on 11 May 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $53.49 on 17 February 2025 and currently trades at around $34
Covid Pandemic (2020)
• DKNG stock fell 0.2% from a high of $10.70 on 1 January 2020 to $10.68 on 2 January 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 January 2020
Putting All The Pieces Together: What It Means For DKNG Stock
In summary, DraftKings’ performance across the parameters detailed above are as follows:
• Growth: Extremely Strong
• Profitability: Very Weak
• Financial Stability: Very Strong
• Downturn Resilience: Neutral
• Overall: Strong
Given DraftKings’ strong performance across the aforementioned parameters, which we believe is not fully reflected in its current moderate valuation, we consider the stock a good pick to buy. Notably, the $57 average of analysts price estimate for DKNG reflects a solid 65% upside from the current levels.
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