The DraftKings stock price woes accelerated after the company published its quarterly results and issued a weak forward guidance. DKNG crashed by over 7% to $25 on the extended hours, much lower than the year-to-date high of $53. So, is it safe to buy the dip?

DraftKings stock falls after earnings 

DraftKings, one of the biggest sportsbook companies in the world, is not doing well as competition rises and the sector slows.

In its earnings report on Thursday, the company said that its monthly unique active users rose by just 2% to 3.6 million, much lower than its growth a few years ago.

The average revenue per user rose by 3% to  $106, also lower than how it used to grow a few years ago. 

In its report on Thursday, the company said that its sportsbook handle rose to $11.4 billion from $10.6 billion in the same period last year. The figure has been dropping sequentially after peaking at $14.9 billion in the fourth quarter of last year.

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The sportsbook revenue came in at $596 million, down from $657 million in the same period last year. 

Altogether, the company’s revenue came in at $1.14 billion, up from $1.09 billion last year, while its net loss was $270 million.

Most importantly, the company revised its forward guidance lower. It now expects that its revenue will be $5.9 billion, down from $6.1 billion in 2024. If it achieves this, it will mean that its total revenue growth will be between 24% and 28%.

It also lowered its EBITDA guidance to between $450 million and $550 million, also lower than what it expected. 

The company’s weak guidance is likely because people are placing fewer bets than they did in the past. Also, competition has jumped over the years, with some of the biggest competitors being companies like FanDuel, BetMGM, Caesars Sportsbook, BetRivers, and PointsBet. 

DKNG stock price analysis 

DKNG stock price chart | Source: TradingView

The daily timeframe chart shows that the DKNG stock price has come under intense pressure in the past few months, moving from the year-to-date high of $53 in February to $25 today. This performance is in line with that of other top companies in the industry.

DraftKings stock price formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other.

It has now plunged below the important support level at $29.78, its lowest level in April this year, a sign that bears have prevailed.

Oscillators like the Relative Strength Index (RSI) and the MACD indicators have all continued falling this month. Therefore, the path of the least resistance for the DKNG stock price is downwards, with the next key target being at $20. A move above the resistance at $29.7 will invalidate the bearish outlook.

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