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Polymarket and Kalshi are major threats to DraftKings' dominant betting market.
DraftKings has missed Wall Street expectations for six consecutive quarters.
Despite a brief relief rally, DKNG continues to exhibit severe relative price weakness.
DraftKings Company Overview
Zacks Rank #5 (Strong Sell) stock DraftKings ((DKNG - Free Report) ) is a leading digital sports entertainment, gaming, and sports betting company. The Boston, MA-based firm was created to “fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming, and digital media. DraftKings is the only U.S. based, vertically integrated sports betting operators. With regulatory approval in 26 states and Washington, D.C., the multi-channel provider of sports betting and gaming technology powers sports and gaming entertainment for 50 operators. DraftKings is the official daily fantasy partner of the NFL, MLB, and the PGA Tour. Additionally, DKNG is an authorized gaming operator of the NBA MLB, and the official betting operator of the PGA Tour.
DraftKings Duopoly is Ending
Combined, DraftKings and FanDuel, which is part of Flutter Entertainment ((FLUT - Free Report) ), dominate andcomprise nearly 2/3s of the U.S. online sports betting market. However, prediction markets such as Polymarket and Kalshi have gained immense popularity and are likely to challenge the DKNG/FLUT duopoly, capturing market share and compressing margins. Although DKNG gross margins have bounced recently, they have compressed from a high of 47% in 2021 to 41% today.
Image Source: Zacks Investment Research
Beyond rapidly increasing competition, tax risks are arising for DKNG. For instance, in New York, DKNG’s largest market by revenue, there is a proposal for a 51% tax, which would negatively impact profitability.
DKNG Falls Short of Wall Street Expectations
Wall Street is a game of expectations, and lately, DraftKings has fallen short. DKNG has missed Zacks Consensus Estimates for six consecutive quarters. Over the past 4 quarters, the company has missed Zacks Consensus Analyst Estimates by a margin of 19.25%.
Image Source: Zacks Investment Research
Meanwhile, several Wall Street analysts tracked by Zacks Investment Research have recently lowered EPS expectations for 2026 and 2027.
Image Source: Zacks Investment Research
DKNG Technical: Relative Price Weakness & Bear Flag
Over the past year, DKNG shares have exhibited troubling relative price performance, plunging 29% while the S&P 500 has gained 26%.
Image Source: Zacks Investment Research
Although DKNG shares have staged a four-week relief rally, they are wedging toward the declining 10-week moving average, an area where bears are likely to re-emerge. Additionally, selling volume (red bars) has dominated accumulation volume.
Image Source: TradingView
Bottom Line
With the emergence of new competition, DraftKings’ sports betting duopoly is coming to an end. Earnings expectations are trending lower, the technicals are deteriorating, and margins are likely to narrow.
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Bear of the Day: DraftKings (DKNG)
Key Takeaways
DraftKings Company Overview
Zacks Rank #5 (Strong Sell) stock DraftKings ((DKNG - Free Report) ) is a leading digital sports entertainment, gaming, and sports betting company. The Boston, MA-based firm was created to “fuel the competitive spirits of sports fans with products that range across daily fantasy, regulated gaming, and digital media. DraftKings is the only U.S. based, vertically integrated sports betting operators. With regulatory approval in 26 states and Washington, D.C., the multi-channel provider of sports betting and gaming technology powers sports and gaming entertainment for 50 operators. DraftKings is the official daily fantasy partner of the NFL, MLB, and the PGA Tour. Additionally, DKNG is an authorized gaming operator of the NBA MLB, and the official betting operator of the PGA Tour.
DraftKings Duopoly is Ending
Combined, DraftKings and FanDuel, which is part of Flutter Entertainment ((FLUT - Free Report) ), dominate andcomprise nearly 2/3s of the U.S. online sports betting market. However, prediction markets such as Polymarket and Kalshi have gained immense popularity and are likely to challenge the DKNG/FLUT duopoly, capturing market share and compressing margins. Although DKNG gross margins have bounced recently, they have compressed from a high of 47% in 2021 to 41% today.
Image Source: Zacks Investment Research
Beyond rapidly increasing competition, tax risks are arising for DKNG. For instance, in New York, DKNG’s largest market by revenue, there is a proposal for a 51% tax, which would negatively impact profitability.
DKNG Falls Short of Wall Street Expectations
Wall Street is a game of expectations, and lately, DraftKings has fallen short. DKNG has missed Zacks Consensus Estimates for six consecutive quarters. Over the past 4 quarters, the company has missed Zacks Consensus Analyst Estimates by a margin of 19.25%.
Image Source: Zacks Investment Research
Meanwhile, several Wall Street analysts tracked by Zacks Investment Research have recently lowered EPS expectations for 2026 and 2027.
Image Source: Zacks Investment Research
DKNG Technical: Relative Price Weakness & Bear Flag
Over the past year, DKNG shares have exhibited troubling relative price performance, plunging 29% while the S&P 500 has gained 26%.
Image Source: Zacks Investment Research
Although DKNG shares have staged a four-week relief rally, they are wedging toward the declining 10-week moving average, an area where bears are likely to re-emerge. Additionally, selling volume (red bars) has dominated accumulation volume.
Image Source: TradingView
Bottom Line
With the emergence of new competition, DraftKings’ sports betting duopoly is coming to an end. Earnings expectations are trending lower, the technicals are deteriorating, and margins are likely to narrow.