Steven Pizzella of Deutsche Bank raised his DraftKings price target to $28 after adding prediction markets into his valuation.
Wednesday’s note covered multiple tweaks to Pizzella’s model before the company’s second-quarter earnings report. While he raised his price target from $26 and said the results could provide a short-term catalyst for the stock, he maintained his Hold rating.
Pizzella noted the company’s over-reliance on NFL results to meet full year EBITDA targets, slowing online sports betting handle growth and slipping online casino market share as reasons for maintaining his rating.
Lower DraftKings EBITDA expectations
Pizzella now expects DraftKings to report $140 million in second quarter adjusted EBITDA, down from his previous $246 million estimate and below the $198 million consensus.
That drop is due to lower sports betting and online casino revenue than expected as well as increased marketing expenses.
Online sports betting revenue is now expected to be $884 million (from $968 million) on lower hold and higher promotions. He forecasts $446 million in online casino revenue (from $469 million), which he said reflects Deutsche Bank’s read on state revenue reports.
Overall, adjusted EBITDA for the year is now forecast at $716 million, down around $20 million from the previous estimate. The lower second quarter expectations should be partially offset by a 12% hold in the fourth quarter, Pizzella noted. DraftKings set its 2026 adjusted EBITDA guidance range at $700 million to $900 million.
His model now also includes online casino launches in Alberta next week and Maine in January. Caesars has confirmed it is partnering with the same tribes in Maine that it does for sports betting, though DraftKings has not yet confirmed an online casino partnership with its betting partner in the state.
Regulatory challenges remain
Another factor behind Pizzella’s Hold rating is the potential for additional legislative and regulatory headwinds.
” … we continue to see a challenging legislative and regulatory backdrop, including the potential for additional tax increases and other market specific restrictions,” Pizzella noted.
Several states have considered raising gaming taxes to help address budget shortfalls. Most recently, North Carolina approved an increase in its sports betting tax rate to 23% from 18%.
