DKNG Fell 12% In A Day. What To Do Now?
DraftKings (DKNG) stock is down 11.6% in a day. Already own the stock or planning to buy? You might want to re-consider based on the valuation as the stock still looks expensive. Consider the following data:
- Size: A $19 Bil company with $5.4 Bil in revenue currently trading at $37.40.
- Fundamentals: Last 12 month revenue growth of 25.8% and operating margin of -6.2%.
- Liquidity: Has Debt to Equity ratio of 0.1 and Cash to Assets ratio of 0.28
- Valuation: Currently trading at P/E multiple of -61.0 and P/EBIT multiple of -63.7
- Has returned (median) 27.4% within a year following sharp dips since 2010. See DKNG Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for DKNG, see Buy or Sell DKNG Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and DKNG drops another 20-30% to $26 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into DraftKings (DKNG) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: DKNG provides digital sports entertainment, daily sports betting, iGaming opportunities, and develops licensing software for online and retail sportsbooks and casino gaming platforms across multiple channels.
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2022 Inflation Shock
- DKNG stock fell 85.7% from a high of $71.98 on 19 March 2021 to $10.27 on 11 May 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $53.49 on 17 February 2025 , and currently trades at $37.40
| DKNG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -85.7% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- DKNG stock fell 44.5% from a high of $63.78 on 2 October 2020 to $35.40 on 30 October 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 5 February 2021
| DKNG | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -44.5% | -33.9% |
| Time to Full Recovery | 98 days | 148 days |
Worried that DKNG could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.