ARK Invest Shifts Tech Funds to DraftKings, Bets on Sports Betting's High-Growth Future

ARK Invest's Cathie Wood has made a significant strategic shift in her portfolio, purchasing a large stake in DraftKings (DKNG) while divesting positions in Roblox and Coinbase, signaling her evolving outlook on the tech and gaming sectors. The moves, revealed through multiple sources, highlight ARK's focus on high-growth opportunities in sports betting and iGaming amid a volatile market environment.

Wood's firm acquired 511,049 shares of DraftKings across three ETFs, including the ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF), according to a Casino.org report. This purchase followed a recent eight-day losing streak for DraftKings, which has seen its stock fall nearly 27% over the past month, the Casino.org report added. The move appears to capitalize on a perceived undervaluation, with DraftKings' price-to-sales ratio near a two-year low and institutional ownership at 84.43%, according to GuruFocus data. Analysts note that ARK's investment may reflect confidence in DraftKings' long-term potential, despite short-term challenges such as regulatory risks and competition from prediction markets, Casino.org noted.

Concurrently, ARK sold 182,528 shares of Roblox Corp. (RBLX) for $18.77 million and trimmed its Coinbase Global (COIN) position by 33,363 shares, valued at $11.86 million, according to an Investing.com report. These sales align with broader portfolio adjustments, as ARK shifted capital toward Ethereum-focused firm Bitmine Immersion Technologies, acquiring a 1.5% stake in the firm across its ETFs, the Cointelegraph report said. The pivot underscores Wood's ongoing interest in blockchain infrastructure, even as she reduces exposure to high-growth tech stocks facing valuation pressures.

DraftKings itself reported mixed financial results in Q4 2024, with revenue rising 13% to $1.39 billion but adjusted EBITDA dipping to $89.5 million due to customer-friendly NFL outcomes. The company, however, remains optimistic about 2025, projecting $6.45 billion in revenue and $900 million to $1 billion in EBITDA. Its expansion into new markets-including pending launches in Missouri and Puerto Rico-alongside a $788 million cash reserve, positions it to capitalize on the growing U.S. sports betting sector.

The stock's recent volatility has drawn attention from both institutional and retail investors. DraftKings' beta of 2.16 indicates high sensitivity to market swings, while its Altman Z-Score of 2.1 suggests a precarious financial position, according to GuruFocus. Despite insider selling activity and a negative operating margin of -6.16%, the company's gross margin of 39.45% provides some cushion for operational expenses, GuruFocus data shows.

ARK's investment in DraftKings also comes amid broader industry shifts. Prediction markets, led by platforms like Kalshi and Robinhood, have intensified competition in the betting space, prompting analysts to lower EBITDA forecasts for DraftKings and its peers, Casino.org reported. However, DraftKings' dominance in 28 U.S. states and 40% of Canada's population-particularly in Ontario-gives it a unique edge in a fragmented market.

Looking ahead, DraftKings plans to leverage technology such as AI and machine learning to enhance user engagement and personalize betting experiences. Its acquisition of Jackpocket has also expanded its digital lottery offerings, contributing to a 55% year-over-year increase in monthly unique payers in Q3 2024.

While ARK's moves reflect a strategic bet on the future of sports betting, they also highlight the risks inherent in speculative sectors. DraftKings' debt-to-equity ratio of 1.89 and regulatory uncertainties in key markets remain concerns, GuruFocus notes. For now, however, the company's aggressive expansion and ARK's renewed confidence suggest a pivotal chapter for the iGaming industry.