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If you’re familiar with the world of fantasy sports or sports betting, you’re likely already familiar with betting hub DraftKings (NASDAQ: DKNG). DraftKings allows users to participate in daily fantasy sports challenges with prizes awarded to users who show the best performances. DraftKings’ stock prices have seen a steady increase in value since the onset of the COVID-19 pandemic, outpacing the S&P 500 in January 2021 with an increase in value of 16%.
Adding a few shares of DraftKings stock to your portfolio can be an excellent way to invest in the world of online fantasy sports and virtual betting. If you’re interested in learning more about the history of DraftKings, how to invest in its stock or the potential upsides and downsides of making an investment in this company, our guide will help you trade confidently.
How to Buy DKNG Stock Summary:
- Step 1: Pick a brokerage.
- Step 2: Decide how many shares you want to buy.
- Step 3: Choose your order type.
- Step 4: Execute your trade.
How to Buy DraftKings (DKNG) Stock
If you’re familiar with the process of how to buy stocks, you can likely already use your existing brokerage account to begin trading. DraftKings’ stock trades on the Nasdaq market, which means that every U.S.-based broker will easily allow you to buy and sell shares of DKNG. If you’ve never invested in the stock market before, here are the steps that you’ll need to take to get started.
- Pick a brokerage.
The first step to buy or sell DraftKings’ stock is to open an account with a broker. A broker is a financial service provider that executes buy and sell orders on behalf of retail investors. There are a wide range of brokers offering services throughout the country — some of the factors you might want to consider before you open an account may include:
• Commissions and account fees: Though many brokers have switched to a $0-fee commissions structure, there are still a few brokers that charge a small commission each time you place a buy or sell order. These fees can add up quickly, especially if you’re a frequent trader. If you plan on investing daily or weekly, be sure that you account for each brokers’ fee schedule before you open your account.
• Minimum account balances: Some brokers have $0 minimum account balances, while others may require you to hold up to $1,000 in your account to avoid fees. If you only have a few dollars to invest, be sure to search for a broker that offers $0 account minimums.
• Access to additional markets: If you only want to buy and sell DraftKings’ stock, access to additional markets might not be high on your list of priorities. However, if you’re interested in investing in other types of assets beyond U.S.-based stocks (for example, forex currencies, cryptocurrencies or options) you may need to search for an individual broker that offers extended market access. Be sure to review each broker’s list of supported markets before you decide where to open an account.
- Decide how many shares you want.
After you’ve opened your brokerage account and added a funding source, you can use your broker’s trading platform to start buying and selling stocks. One of the first decisions that you’ll need to make when you decide to place a buy order is the number of shares that you want to add to your portfolio.
First, set a budget that’s in line with your risk tolerance and belief in DraftKings as a company. You may want to do a bit of independent price research and compare expert investor sentiments before you decide how many shares of stock you want to buy.
After you’ve set a budget, take a look at the current market price of DKNG stock and calculate how many shares you can buy with your budget. Don’t worry if this doesn’t round out to an even number of shares — most brokers will allow you to buy and sell “fractional shares” based on the exact amount of money you want to invest.
- Choose your order type.
When you’ve decided how many shares of stock you want to buy, your next task is to choose a type of order. There are multiple types of buy orders, and the buy order that you choose will determine when your order is placed. Most brokers offer retail investors a wide range of buy order options, but here are a few of the most common order types investors use.
• Market buy: A market buy is executed as soon as possible at the current market rate. For example, if shares of DKNG are trading at a market price of $55, placing a market order means you’ll pay around $55 per share when your order is executed.
• Limit buy: A limit buy is executed at or below a specific price. For example, if shares of DKNG are trading at an average price of $55 per share, you might set a limit buy to purchase 10 shares with a limit price of $54. If the price of the stock falls to $54, your broker will execute your order — if not, your order will remain open. Limit buys give you more control over the price that you pay per share of stock but are less likely to be filled when compared to market orders.
• Trailing stop order: A trailing stop order is an order that’s triggered when the price of a stock rises above its lowest price by a specific percentage or dollar amount. Trailing stop orders are executed at the current market rate when conditions are met.
- Execute your trade.
Once you finalize the details of your order, submit it through your broker’s trading platform. From here, you can sit back and relax — your broker will work to fill the order according to the specifications of your buy order.
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DKNG Stock History
Established in 2012 as a one-on-one betting site for baseball fans, DraftKings enjoyed quick success as its launch coincided with Major League Baseball’s first day of the 2012 season. By July 2012, the company had received $1.4 million in investment funds, and by February 2014, DraftKings reported that its user base had grown to more than 50,000 daily users.
After a dip in value that lasted through October 2020, DraftKings stock is heading toward new highs.
The company went public in April 2020 with a valuation of more than $3.3 billion after a reverse merger with a special purpose acquisition company (SPAC). DraftKings’ stock has seen a steady increase in value since the onset of the COVID-19 pandemic, peaking in value in October 2020. After suffering a short dip that lasted through November of the same year, DraftKings’ stock is back on track for record highs, beating out returns from the S&P 500 through January 2021.
Pros to Buying DKNG Stock
Sports betting and gambling laws have long been the primary factor holding DraftKings back from expanding into mobile betting and gaming on a national scale. After the results of the 2020 election, a wave of states ushered in new laws legalizing online sports betting, along with loosened laws surrounding gambling. Results of the election showed a November spike in DraftKings’ stock price, as investors anticipated that the company would use its built-in platform and active user base to further its journey toward profitability through expanded betting services.
Cons to Buying DKNG Stock
Though DraftKings stock price is back on an incline, it hasn’t all been smooth sailing for the sports betting website. In 2017, a merger between DraftKings and rival sports betting site FanDuel was blocked by the Federal Trade Commission after the government body declared that the merger would constitute a monopoly.
DraftKings also missed its earnings targets for the last 3 consecutive quarters — in Q3 2020, DraftKings disappointed analysts by coming in more than 37% below the expected earnings per share. Although DraftKings is making progress toward profitability, it will need to heavily capitalize on gambling and sports betting legalization if it wants to bring its earnings per share back up to what investors expect.
Investing in the Future of Gambling
With lax regulations on sports betting loosening, adding DraftKings’ stock to your portfolio can seem like an easy way to capitalize on the future of online gambling. Remember, however, that no stock is guaranteed to increase in value, which makes portfolio diversification especially important. Never invest more money than you can afford to lose in any single company.