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Is DraftKings a good stock to buy after Disney deal reports?

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DraftKings Inc. (NASDAQ:DKNG) extended gains by more than 5% on Friday after positive reports. Different news sources indicated that the sports-betting firm was close to a huge deal with Walt Disney’s ESPN. The size and structure of the deal were not disclosed. However, sources did indicate that ESPN will capitalise on DraftKings’s network in sports betting.

The partnership reports are significant for DraftKings. The stock has fallen 40% year-to-date owing to the macro issues. That comes as investors shun loss-making growth names in preference for value-preserving alternatives.

A brief check on the company’s second quarter shows that it reported a loss of $217 million or £195.5 million. The loss improved from $305.5 million or £275 million in the prior year’s quarter. The loss was better than feared, but that did not deter sellers looking for value stocks in a recession.

Analysts’ ratings have been mixed for DraftKings. On October 6, Exane BNP Paribas issued an underperforming rating on the stock, with a price target of $12. The rating forced a 4% decline in the stock, which currently trades at $16. TipRank rates the stock a moderate buy with a $24.27 price target.

DraftKings trades on a descending channel

Source – TradingView

Turning to the technical side, DraftKings trades on a descending channel. An RSI reading of 51 indicates almost a midpoint and equal bullish and bearish positions.

How attractive is DraftKings

This article dismisses a bull call for DraftKings based on the descending channel. However, the RSI reading and the latest recoveries from the $10 bottom could attract buyers. Should the stock fail to break up from the channel, we should watch for price action lower at $14.

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