DraftKings Stock Hits Near Record High in 2020: What to Expect and Price Outlook

DraftKings Inc. (DKNG) has experienced one of the most remarkable momentum-driven rallies of 2020, with its stock price quadrupling since the March lows despite widespread closures of major sports events, except for limited activities like horse racing, UFC, and boxing. The rise of eSports has partially compensated for the absence of traditional sports, but the market’s optimism largely hinges on a positive long-term outlook. However, successfully reopening professional and college sports remains a significant challenge in the current environment.

Recent weeks have seen at least four college football training camps shut down due to multiple COVID-19 cases, casting doubt on the viability of the upcoming NFL and NCAA seasons. Sports leagues are under pressure to minimize public concerns as financial interests often take precedence over player and spectator safety. Additionally, if leagues resume play but face outbreaks forcing quarantines, the resulting disruptions could severely impact operations and investor confidence.

Despite these hurdles, Wall Street maintains a bullish stance on DraftKings, driven by increasing chances of more U.S. states legalizing sports betting. Analysts’ consensus includes eight "Buy" ratings and one "Hold," with price targets ranging from $25 to $55. Currently trading just below the median $44 target, DraftKings has room for potential gains. However, the success of the planned NBA season restart on July 31 will be critical; any setbacks could trigger a wave of downgrades.

DKNG Stock Price Performance (2019–2020)

The current iteration of DraftKings emerged in December 2019 after merging with Diamond Eagle Acquisition Corp. and SB Tech. Following the merger, the stock surged above $10, marking the beginning of a strong upward trend that peaked in the high teens by February. A breakout attempt in early March failed, leading to a sharp decline that wiped out nearly 46% of the stock’s value.

By early April, buyers stepped in at March’s low, initiating a steady recovery that reached previous highs by April 21. The stock then broke out with above-average volume, hitting an all-time high of $44.79 in early June. Since then, investors have exercised caution, resulting in profit-taking just below the prior peak on June 22.

Short-Term Technical Outlook

This month, DKNG stock touched its 20-day simple moving average (SMA) for the first time since April, bounced for eight sessions, and has now returned to this support level. The daily stochastic oscillator indicates waning momentum, reflecting recent legislative challenges and skepticism about the prospects for professional sports in 2020. A drop below $38 could trigger a sell signal, completing a potential double top formation.

The on-balance volume (OBV) indicator showed strong buying momentum in April and May, reaching record highs alongside price gains. However, a large-volume sell-off on June 22 suggests that some investors, likely retail traders from platforms like Robinhood, exited their positions.

If the stock pulls back further, solid support is expected near the 50-day exponential moving average (EMA), aligning with the 38.2% retracement level in the low $30s. Long-term investors entering at this range could benefit from a rebound, though ongoing COVID-19 risks and possible disruptions to sports schedules remain significant concerns.

Conclusion

DraftKings stock has attracted considerable attention from momentum investors during the past quarter. Nonetheless, uncertainties around the resumption of professional and college sports amid the pandemic pose substantial risks that could influence the stock’s trajectory.

Disclosure: The author did not hold any positions in DraftKings or related securities at the time of writing.

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