DraftKings shareholders have something to cheer about after a rough few weeks that saw the stock dip to its lowest point in years.
Julie Hoover of Bank of America upgraded DraftKings to buy from neutral on Monday, maintaining her $27 price target. That sent the stock up more than 5% with the momentum continuing on Tuesday.
Part of the reason for the upgrade is the fact DraftKings is down 47% in the past year, Hoover said. The stock closed at $18.59 on Friday, the lowest closing price since April 2023.
“We believe the recent underperformance is driven by concerns around unfavorable NFL outcomes and uncertainty around the magnitude of PM investment,” Hoover wrote in Monday’s note. “In our view, the stock reaction is overdone, creating an attractive opportunity.”
Predictions de-risked, estimates falling
One of the biggest factors for the upgrade is that DraftKings is in a win-win position when it comes to prediction markets, Hoover said.
DraftKings, now the third-ranked operator for predictions, could make $400 million next year in fees and another $200 million to $400 million on market making. The fact that predictions volume has grown slower than sportsbooks handle to start the football season has relaxed some cannibalization concerns, she added.
Hoover previously expected sports betting handle to fall in the second half and 2027, but that has flipped to forecasts of modest low-single-digit growth. That lifted EBITDA outlook by $50 million this year and $75 million next year.
On the other hand, should the U.S. Supreme Court rule against sports event contracts, a key risk would be gone which could lead to a re-rating.
Cutting 2026 DraftKings estimates
DraftKings could also be in position to outperform earnings expectations are EBITDA forecasts are falling, Hoover said.
Her estimates are no different. Kelly cut his 2026 EBITDA forecast by 20% to $500 million after CEO Jason Robins noted predictions spending could be “meaningfully” higher.
She raised next year’s EBITDA forecast to $1.15 billion from $1.05 billion, with growth coming from a stronger core business and market making revenue.
Hoover noted she would like to see the company manage costs better within its core business to see margins and flow-through rising into 2028.
