DraftKings
LAS VEGAS, NV – September 22. 2016 – DraftKings Fantasy Sports iPhone App In The Apple App Store For Download. Selective Focus.

The DraftKings stock price tumbled on Tuesday after a short report by Hindenburg Research. The shares plummeted to a two-week low of $44 before being saved by a positive report by analysts at Credit Suisse. They are trading at $$47.90, valuing the company at more than $19 billion.

Hindenburg Research on Draftkings

Hindenburg Research is one of the best-known short analysts in Wall Street. The company has made several notable calls in the past, some of them being Nikola, Lordstown Motors, Clover Health, and Genius Brands, among others.

In a lengthy report today, the analysts warned that DraftKing was exposed to the black market through its association with SBTech, a company it acquired. The report estimated that 50% of SBTech’s came from the black market, money-laundering, and the black market. 

It also warned that DKNG was greatly overvalued. At a market cap of more than $21 billion, the company was valued more than companies like Fanduel, Kambi, and Wynn Interactive, respectively. It is also more valuable than popular companies like Flutter Entertainment and Entain. The report said:

“In short, the market is pricing in perfect execution of a business with a stellar brand in a new market subject to intense competition and fraught with regulatory uncertainty.”

However, in a rejoinder to the report, analysts at Credit Suisse said that there was minimal value in the company’s stock that was being applied to SBTech. For example, SBTech made a revenue of $105 million in 2020, which was equivalent to about $1 per share for Draftkings. The report said:

“While not ideal, in a worst case scenario, an SBTech issue would not necessarily interfere with betting operations today. We would use today’s weakness as an opportunity ahead of potential Canada legalization (senate meeting today) as well as New York, both of which are catalysts for DKNG.”

So, what next for the DraftKings stock price?

DraftKings stock price analysis

DraftKings stock price
DraftKings stock price chart

Turning to the daily chart, we see that the DKNG stock price has been under pressure lately. It has dropped by more than 36% from its year-to-date high. Notably, it has also moved below the 50-day and 100-day exponential moving average, which sends a signal that bears are in control. As if this is not enough, the stock moved below the ascending blue trendline and it seems to be forming a head and shoulders pattern. 

Therefore, in my view, while I don’t know much about the Hindenburg accusations, I believe that this is not the right time to buy the stock. For one, I see no bullish signal – at least on the daily chart – and I expect more negative headlines to come out soon.

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