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DraftKings' Move Into NFTs Could be Game Changer

Real Money's Timothy Collins likes the diversification the deal with the NFL gives online sports betting company.
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DraftKings  (DKNG) - Get DraftKings Inc Class A Report is a tough one  Sometimes highly valued, it took a beating in fall trading. Capable of generating massive revenues, it continues to lose money. Used by millions of sports fans, its business model remains legally uncertain at best.

All of these issues might be red flags for investors, or they might signal the volatility that always follows innovation. Timothy Collins is betting on the latter, especially as DraftKings has doubled down on new technology.

“Fall has been a season to forget for DraftKings,” Collins noted recently on Real Money. “From the low $60s to the high $20s has been a painful decline.”

He added “there has been no bounce in the shares until the past week. And even that bounce was $5 after a $35 decline. Not exactly exciting, but after waiting for signs of a bottom, I'm finally ready to start a position here.”

DraftKings has been moving into the non-fungible token arena. “It just unveiled plans for gamified NFTs in the NFL space,” Collins said.

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“By working with the NFL Players Association, DraftKings will be able to use authentic names, images, and likenesses. Many of the football-related NFTs simply use a generic reference,” he added.

The program will take about a year to develop, but “I do believe it will broaden DraftKings' reach and diversify its revenue stream. Dapper Labs will continue to provide competition with NFL All Day (terrible name selection, by the way) but there's enough room for both in the space.”

One of the biggest problems with the range of money-losing tech companies out there is how often their business model boils down to “keep doing the same thing but bigger.” (Take a loss on every ride you book, but make it up through volume… and long term plans to establish an illegal monopoly.) Watching DraftKings diversify its business model and try to innovate its way into profitability is a strong sign for Collins that they’re a good bet for investors.

“The bullish parabolic stop-and-reverse (PSAR) position is enough for me to take a trading shot here. I do think as we get closer to the NFL playoffs and NCAA basketball gets deeper into the season, we'll see a surge in online gambling again as wel," Collins said.

"I like the long-term story with the NFT announcement but I also like a trade here too,” he added.

Get more trading strategies and investing insights from the contributors on Real Money.