PreMarket Prep Stock Of The Day: DraftKings

The good news is that professional sports are back, with the NBA restarting its regular season, the NHL playoffs commencing and MLB finally getting underway. The bad news is that we don't know how long it will last.

The stock that will benefit from wagering on sports, DraftKings DKNG, is the PreMarket Prep Stock Of The Day.

Even Portnoy Is Skeptical: Television ratings were through the roof for MLB, but unless you enjoy fake fans noise, it was hard to really get into the games. Similarly, unless you were one of the fans who were able to “Skype in” during the NBA games, the mood was dull and somber.

And what fun would a seventh game of a Stanley Cup Final be without rabid fans on the edge of their seats?

Are Fans Getting The Real Deal? Of all the sports stories over the weekend, perhaps the most intriguing was the sudden unaccounted disappearance of Yoenis Cespedes of the New York Mets. Without notifying the team management, he bolted from a hotel room in Atlanta resulting in a major concern for his well being.

As it turns out, Cespedes decided to opt out of the season over COVID-19 concerns, and can you really blame him? Along these lines, several NFL players are opting out of the regular season for the same reasons.

With already murky injury reports and other shenanigans used by NFL teams to gain an advantage, how difficult will it be to handicap an NFL game, without knowing who will even play in the game?

A Tired Chart: In April, DraftKings completed a reverse merger valued at $3.3 billion and became a publicly-traded company. The merger involved Diamond Eagle Acquisition Corp., a special-purpose acquisition company that went public in May 2019, as well as SBTech Global Ltd. The combined company kept both DraftKings' name and its executive management.

It commenced trading under DraftKings name and symbol on April 24. On that day, it rallied from $17.53 to $19.35, which instigated a monster rally that finally peaked on June 2 at $44.79.and reversed course.

The ensuing decline took the issue to $27.54 in mid-July now is attempting to rebound with an overabundance of trapped longs. Over the last couple of weeks, the preponderance of sellers at the $38 level has attracted step-down sellers trying to mitigate their losses. As of 11:30 a.m. EST, the issue has not revisited Friday’s close ($33.38), its lowest since July 15 ($32.56) as $33.09 stands as the high for the session.

Moving Forward: In the economic environment with shrinking GDP and rising unemployment, will sports fans have enough disposable income to risk on sports wagering. Also, what are the prospects for the company if any of the four major sports seasons are interrupted or canceled? At this time, the chances of a college football or basketball happening is highly in doubt.

For bulls of the issue, eventually, the sports world will return to normal, which is hardly the recipe for prudent long-term investing.

The full discussion on the issue from today’s show can be found here.