Is DraftKings stock a buy amid rumors of Bleacher Report acquisition?

on May 25, 2021
  • Reports emerged that DraftKings showed interest in acquiring Bleacher Report.
  • Shares of the gaming company jumped more than 7% on the news.
  • Should you buy DKNG stock on the bounce?

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Shares of the daily fantasy sports contest and betting operator DraftKings Inc. (NASDAQ:DKNG) on Monday gained 7.24% after news emerged that it showed interest in acquiring WarnerMedia’s sports media property, Bleacher Report. Reports also indicate that Discovery Communications Inc. (NASDAQ:DISCA) backed Group Nine Media had shown interest in the sports news platform.

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Why DraftKings buying Bleacher Report is exciting

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DraftKings’ interest in Bleacher Report may have seemed unrealistic last year, but things have since changed that could see a deal struck. Last week, AT&T Inc. (NYSE:T) announced that its subsidiary WarnerMedia will be merging with Discovery. 

Reports also suggested that for the merger to work, the two companies may have to shed some assets. Sports news platform Bleacher report is tipped to be one of those assets. 

If DraftKings went ahead and made the acquisition, then this would put it in direct competition with Penn National Gaming Inc. (NASDAQ:PENN), which owns perhaps the biggest name in sports betting, Barstool Sports. The relationship between sportsbook companies and sports news platforms in the US is evolving. More gaming companies in the country now appear to be following in the footsteps of their European counterparts like the UK’s Sky Betting and Gaming, in integrating betting with sports news. This creates synergies between the sportsbook platform and the news platform thereby increasing revenues. DraftKings could benefit significantly if it buys Bleacher Report.

Source- TradingView

DKNG technical analysis: what the charts are saying

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Technically, shares of DraftKings appear to have recently bounced back after bottoming at $39.82, the lowest level reached this year. The stock has now surged to trade above the 100-hour moving average in the 60-min chart. It also appears to be attempting a channel breakout that could lead to more upward movement. The bearish channel started after a triple-top reversal in March.

The bulls will be targeting short-term profits at the key resistance levels at $53.10 and $58.23. Key support levels can be found at $44.13 and $39.82. The stock appears to be on a bull-run following Monday’s report.

Bottom line: Buy DraftKings on the bounce

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In summary, DraftKings stock is still down more than 35% from its 52-week high of $74.38 that was reached in March. While there is no statement from DraftKings to confirm its intentions to buy Bleacher Report, it is increasingly looking more likely following WarnerMedia’s and Discovery’s merger. The prospect of integrating the sports news property into its business is exciting for investors as the sports industry has yet to fully reopen.

Furthermore, online sports betting is just beginning to gain momentum in the US as it is legal in only a small handful of states. This means there is a lot of room left to run for the stock in the long term.

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