DraftKings shares fell 21.3% on Friday to a new 52-week low after the company cut its financial guidance and said its prediction markets business could generate between $900 million and $1.05 billion in combined adjusted EBITDA losses through 2027.
Stifel downgraded DraftKings to Hold from Buy and cut its price target to $21 from $32. Analyst Jeffrey Stantial called the company a "show-me story," saying it could take several quarters for investor sentiment to improve regardless of the outcome of legal challenges involving prediction markets.
"Bottom-line, DKNG becomes a show-me story and we think it will take several quarters for sentiment to improve regardless of PM legal outcome," Stantial said.
JPMorgan cut its rating to Neutral from Overweight, lowered its price target to $21 from $30 and removed DraftKings from its Analyst Focus List. Analyst Daniel Politzer cited uncertainty over future profitability and competition.
UBS downgraded the stock to Neutral from Buy and reduced its price target to $22 from $48. Analyst Robin Farley questioned how much value investors could assign to the prediction markets business before its regulatory outlook becomes clearer.
"We believe it is difficult to place meaningful value on the prediction markets business given uncertain regulatory outlook," Farley wrote.
DraftKings lowered its 2026 core revenue guidance to $6.35 billion-$6.55 billion from $6.5 billion-$6.9 billion. It also cut its adjusted EBITDA forecast to $175 million-$275 million from $700 million-$900 million.
Chief Executive Officer Jason Robins attributed 60% of the approximately $100 million reduction in core adjusted EBITDA guidance to unfavorable sports results, with the remainder linked to increased online casino customer acquisition spending.
DraftKings acquired approximately 1 million prediction market customers in three months, with more than 1.6 million engaging with the offering this year. Management has said customer retention and trading activity are comparable to its sportsbook customers.
Analysts, however, questioned whether early trading volumes will translate into sustainable customer activity as promotional incentives decline.
Deutsche Bank analyst Steven Pizzella maintained a Hold rating but cut his price target to $22 from $28.
"Volume increasingly appears real; the debate is now what that volume is ultimately worth and how much stays with DKNG," Pizzella wrote.
Stifel warned that California and Texas account for nearly half of DraftKings' serviceable prediction market, exposing the business to state restrictions, changes to market-making rules and intensifying promotional competition.
JPMorgan also warned that DraftKings' 2027 core earnings forecast implies roughly 75% incremental adjusted EBITDA flow-through, compared with a historical rate of 30%-40%, leaving limited room for weaker results or additional spending.
Robins has defended DraftKings' prediction market investment, arguing that the company can benefit regardless of how future legal challenges involving sports contracts are resolved.
At an October conference, he described the market reaction as a "weird disconnect," saying positive prediction market developments have hurt DraftKings shares while adverse court rulings have lifted them. He added that public investors "do not like uncertainty."
DraftKings' projections factor in a potential Supreme Court ruling by mid-2028. The company expects its 2026 prediction market customers to have paid for themselves by then, while its 2027 cohort would be more than halfway toward that point even if sports contracts are prohibited.
"Our recent performance reinforces our belief that we are in a win-win position no matter how any future court ruling plays out," Robins said.
If sports contracts remain permitted, DraftKings expects prediction market customers to generate more than $1 billion in gross profit in 2028. If they are prohibited, the company could reduce marketing spending and shift customers to other products.
Some analysts remain positive. Macquarie maintained its Outperform rating, arguing that higher spending reflects stronger-than-expected customer acquisition, while Truist retained its Buy rating without assigning value to potential returns from prediction markets.
Citizens JMP analyst Jordan Bender compared the spending strategy with DraftKings' sportsbook expansion in 2022.
"This feels like that moment again," Bender wrote.
Dingnews.com 10/11/2026