DraftKings edges lower despite Golden Nuggets acquisition: is it time to buy?

DraftKings Inc. (NASDAQ:DKNG) shares edged lower 0.5% on Monday despite announcing the Golden Nugget Online Gaming Inc. (BER:4LHS) deal. The Boston, MA-based online gaming company is buying Golden Nugget in an all-stock acquisition valued at $1.58 billion, or about $18.83 per share, implying a more than 50% premium.

GNOG shares spiked more than 47% after the announcement to trade at $18.06. DraftKings is leveraging Golden Nugget’s popular iGaming products, with a database of more than five million customers.

DraftKings’ CEO and Chairman of the Board, Jason Robins, said:

So should you buy or sell DKNG shares now?

Although DraftKings is yet to swing to profits on a trailing 12-month basis, the company’s bottom line could improve significantly following the acquisition of Golden Nugget. The Texas-based iGaming platform trades at a lucrative P/E ratio of 16.35 after Monday’s price spike. Analysts also expect Golden Nugget earnings per share to grow by more than 418% this year, boosting its market valuation.

Therefore, if GNOG maintains its current earnings growth, it could significantly boost DKNG’s bottom line, which analysts expect to fall by about 668% this year before rising 33.60% next year. Overall, analysts expect DraftKings’ bottom line to grow at an average annual rate of 30.30% over the next five years, making it attractive to growth investors.

The company also expects to finalize the Golden Nugget acquisition during the first quarter of 2022, boosting next year’s bottom-line growth.

Therefore, it looks like it may be time to buy DKNG shares ahead of its exciting growth story next year.

Technical overview: DraftKings stock price predictions for Q3 2021

Technically, DraftKings shares seem to be trading just off the 100-day moving average in the intraday chart. In addition, the stock price has also advanced closer to overbought conditions in the 14-day RSI. Therefore, a short-term pullback seems inevitable. However, given Monday’s acquisition announcement and next year’s exciting growth story, investors willing to overlook short-term turbulence may buy now.

They will target profits at $55.77 and $60.40, while the critical support levels are $47.14 and $47.49.

Bottom line: the catalyst for buying DKNG shares now

In summary, DraftKings shares have rallied closer to overbought conditions since last week. However, Monday’s announcement of the Golden Nugget acquisition and the company’s exciting growth story in the next five years makes it a solid buy for growth investors.