DraftKings stock price forecast ahead of earnings. Huge drop possible

The DraftKings (NASDAQ: DKNG) stock price is hovering near its lowest level this year as traders wait for the company’s quarterly earnings scheduled for Friday this week. The shares are trading at $23, which is about 70% below their all-time high. The drop brings its total market capitalization to more than $18 billion. 

DraftKings earnings preview

DraftKings is one of the leading players in sports betting and fantasy sports in the US. 

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The company operates its services in most states where sports betting is allowed like New York and California.

The DraftKings stock price has moved sideways this week even after the success of the Super Bowl even which attracted sports betting of over $1 billion. 

Focus now shifts to the company’s quarterly results that are scheduled for Friday. According to Seeking Alpha, analysts have median estimates of revenue of $445 million. That will be a significant increase from the $213 million that it generated in the third quarter. 

Like most fast-growing companies, DraftKings is expected to continue its loss-making streak. Precisely, analysts expect that the firm lost about 65 cents in Q4. Therefore, analysts will want to see how the company is allocating capital to fund growth. 

DraftKings has a long history of missing analysts’ forecasts. For example, it has missed earnings estimates in all quarters since it went public in 2020. So, another miss will not be a surprise to most investors. 

Analysts will also look at the traction in the markets that it launched recently like Arizona, Wyoming, Louisiana, and Maryland. Most importantly, analysts will be watching at the performance of the company’s new initiatives like DraftKings MarketPlace. 

Finally, the DraftKings stock price will react to the average revenue per monthly unique player (ARPMUP). In Q3, the metric increased by 38% to $47.

DraftKings stock price analysis 

The daily chart shows that the DraftKings stock price has been in a strong downward trend in the past few months. It has declined by more than 68% from the highest point in 2021. Recently, however, the stock has tilted higher as investors cheer the new locations. 

However, a closer look at the pattern shows that it is a form of a bearish flag or pattern. The stock is also below the 25-day and 50-day moving averages. 

Therefore, there is a likelihood that the share price will drop sharply after the company publishes its results on Friday. If this happens, the next reference point will be at $20.