DraftKings Inc.

DKNG Details 

DKNG to Collaborate with AGA: DraftKings Inc. (NASDAQ: DKNG) is engaged in digital sports, entertainment, and gaming. On 10 June 2021, DKNG announced that it plans to join forces with the American Gaming Association (AGA) to advertise the AGA’s Have A Game Plan.® Bet Responsibly™ public service campaign. The company remains on track to apply the campaign to its several owned channels, including at DraftKings’ retail gaming properties, in order to boost safer play. 

1QFY21 Key Financial Highlights: During the quarter, the company reported revenues of $312 million, which skyrocketed 253% year over year. Notably, revenues increased 175% year over year after taking effect of the business combination with SBTech (Global) Limited and Diamond Eagle Acquisition Corp. Moreover, monthly unique payers during the quarter went up by 114%. This depicted the efficacy of the company’s data-driven sales and marketing approach. Average Revenue per MUP (“ARPMUP”) during the quarter went up by 48% on pcp, owing to DKNG’s robust iGaming product offering. The company exited the quarter with a cash balance of $2.82 billion.

Revenues Highlights; Source: Analysis by Kalkine 

Key Risks: The company’s exposure to the international markets intensifies the risk of foreign exchange volatility. Further, the company is exposed to short-term disruptions hindering from challenging macro-economic environment due to COVID-19 led outbreak. Also, stiff competition from peers, integration risk, and stringent regulatory approval adds to the woes. 

Outlook: The company upped its FY21 revenue guidance to be in the ambit of $1.05 billion to $1.15 billion, as compared to the previous expectation of $900 million to $1 billion. The revised guidance depicts year-over-year growth of 63% to 79% in FY21.

Stock Recommendation: Over the last one-year, the stock went up by ~54.98%. The stock made a 52-week low and high of $27.54 and $74.38, respectively. On a technical analysis front, the stock has a support level of ~$45.7 and a resistance level of ~$55.9. On a TTM basis, the stock is trading at a price to book multiple of 8.9x, higher than the industry median of 2.3x.

On May 1, 2021, DKNG completed the business combination with SBTech (Global) Limited, and Diamond Eagle Acquisition Corp. for an undisclosed amount. According to few media reports, DKNG has been alleged that the merger with SBTech revealed DraftKings to transactions in black-market gaming. Notably, Faruqi & Faruqi, LLP, a leading national securities law firm, is examining possible claims against DraftKings Inc. for investors who have suffered losses of more than $50,000 investing in DraftKings stock or options. Considering the stock’s decent performance in the last year, its current trading level, uncertainty surrounding the legal impact of the claims against DKNG, and valuation on TTM basis, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $51.67, up by 1.19% as on 25 June 2021.

DKNG Daily Technical Chart, Data Source: REFINITIV 

ADMA Biologics Inc.

ADMA Details

Quick Look at ADMA’s 1QFY21 Results: ADMA Biologics Inc. (NASDAQ: ADMA) is an end-to-end commercial biopharmaceutical company focused on manufacturing, marketing, and developing specialty plasma-derived biologics. The company remains on track to bolster its supply chain capabilities in 1QFY21, thereby working toward establishing an end-to-end control of its production operations. In April 2021, the company received a nod from U.S. Food and Drug Administration (FDA) for its expanded manufacturing process, enabling fractionation and purification of a 4,400-liter plasma pool for the manufacture of Intravenous Immune Globulin (“IVIG”).

For Q1FY21, the company reported record quarterly revenues of $16.05 million, up 57% on the previous corresponding period (pcp), primarily due to favorable impact of the ongoing commercial ramp-up of our IVIG product portfolio. As at 31 March 2021, the company had total assets of $235.7 million, up 13% compared to the year-end 2020. The company exited the quarter with a cash balance of ~$62.0 million, up from the cash balance of $55.9 million as of December 31, 2020.

Revenues Highlights; Source: Analysis by Kalkine 

Key Risks: On the flip side, ADMA may be subjected to suspensions/withdrawal of prior approvals if its products fail to comply with the regulatory requirements, which could negatively impact its business and financial condition. Also, rising expenses and stiff competition from peers may weigh on company’s financial performance, going forward. 

Outlook: The company’s BioCenters remains committed to achieve 10 or more plasma collection facilities in operation by 2024. Following the FDA approval for the company’s “IVIG” production scale expansion, ADMA expects to increase its total manufacturing production capacity by up to 50% compared to the company’s previous expectations. Further, the company expects that its multi-year remediation and production enhancement objectives will allow it to yield significant returns in the way of margin improvements.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has corrected by ~19.99%. It is currently inclined towards its 52-weeks’ low price of $1.45, offering a decent opportunity for accumulation. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We believe that the company can trade at a slight discount to its peer median EV/Sales (NTM trading multiple), considering the risks involved with the uncertainties of medical R&D outcomes, stiff competition from peers, along with stringent regulatory scrutiny. We have taken peers like CureVac NV (NASDAQ: CVAC), Cytosorbents Corp (NASDAQ: CTSO), to name a few. Considering the decent revenue growth in Q1FY21, rising cash balance, and recently received FDA approval for the company’s Intravenous Immune Globulin (“IVIG”) production scale expansion, decent long-term outlook, current trading level, valuation and associated key risks, we give a “Speculative Buy” rating on the stock at the closing price of $1.72, up by ~4.24% as on 25 June 2021.

ADMA Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined:

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.