Why DraftKings Stock Sank by 22% Last Month

September was the month when the new National Football League (NFL) season kicked into high gear. However, you might not know that from the performance of a company eagerly courting the league's many bettors -- next-generation wager specialist DraftKings (NASDAQ: DKNG).

That's because the company's stock sank by 22% that month on the back of several negative factors, including competition and one or more downbeat analyst notes. All in all, the company was likely glad when September ended.

Here comes fresh competition

DraftKings started the month on something of a high note, as it published market-pleasing quarterly results only a few weeks earlier.

Image source: Getty Images.

In its second-quarter results, unveiled in early August, it posted its sixth consecutive quarter where it earned over $1 billion in revenue. That metric grew a robust 37% year over year to $1.5 billion, while headline net income doubled and then some to almost $158 million. Both figures easily topped the consensus analyst estimates.

But that's the problem with double-digit growth and profitability; the business world notices, and folks with ambition, drive, and capital do something about it.

The prediction markets space is growing significantly, meaning more and intensifying competition for companies like DraftKings. For example, privately held Kalshi posted record trading volume two days in a row in late September. This worries investors, who likely (and understandably) fear that the barriers to entry in legalized sports wagering aren't high enough to protect DraftKings.

Several pundits and investors pointed this out in new DraftKings takes during the month. One was published by The Bear Cave, a popular online newsletter featuring critiques of high-profile stocks.

The site's Edwin Dorsey cited such competitors as a major reason to be concerned about DraftKings. Of those up-and-comers, Dorsey wrote that their "Better odds, higher liquidity, a simple user interface, and nationwide availability for anyone over 18 have attracted significant customer interest."

Fighting back

To DraftKings' credit, those barbs seem to be intensifying its competitive spirit, if anything. As September came to a close, the company announced it had signed a major advertising agreement with media giant -- and major NFL broadcaster -- NBCUniversal (a unit of Comcast).

In DraftKings' words, this deal will see it "featured across NBCUniversal's extensive portfolio of sports properties, spanning the NFL, PGA TOUR, Ryder Cup, Premier League, NCAA football and basketball, NBA, WNBA, and more."

The company already has quite a presence in sports broadcasting; this is a play at becoming even more ubiquitous. Perhaps this will help it keep those increasingly persistent competitors at bay.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.