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DraftKings Stock Up 26% in a Month: Should You Buy, Sell or Hold?
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Key Takeaways
DKNG climbed 25.6% on improving engagement trends and strengthened media distribution.
DraftKings cut its FY25 revenue and EBITDA outlook following weak Q3 results.
Volatility from parlays, higher promotions and an untested predictions product add execution risk.
Shares of DraftKings Inc. (DKNG - Free Report) have gained 25.6% in the past month compared with the Zacks Gaming industry’s rise of 0.8% and the Zacks Consumer Discretionary sector’s growth of 1.2%.
DraftKings’ strong rebound over the past month has been underpinned by improving engagement metrics and renewed confidence in its long-term growth story. Continued momentum in customer engagement — particularly the expanding parlay mix — has reinforced confidence in the company’s margin trajectory, while strategic partnerships with ESPN and NBCUniversal have broadened DraftKings’ distribution and customer acquisition reach.
Although competitive dynamics surrounding emerging prediction markets continue to draw investor scrutiny, the combination of expanding product capabilities, strengthened media distribution and sustained improvement in underlying customer behavior has likely contributed to the appreciation in DKNG shares.
DKNG One-Month Price Performance
Image Source: Zacks Investment Research
Despite the momentum, several underlying fundamentals suggest caution. The company reported dismal fiscal third-quarter performance, with more than $300 million in unfavorable sports outcomes dragging on revenues and pressuring adjusted EBITDA. DraftKings subsequently cut its fiscal 2025 revenue and EBITDA outlook, signaling softer visibility ahead. At the same time, spending tied to its unproven predictions product introduces additional uncertainty.
In parallel, downward estimate revisions have accelerated following the fiscal third-quarter miss and guidance cut. With earnings visibility weakening and execution risks rising, the risk-reward profile appears unfavorable at current levels. Let's delve deeper.
Key Headwinds Weighing on DKNG Stock
One of the most pressing concerns for DraftKings is the mounting unpredictability embedded in its business model. Management noted that a small number of NFL outcomes had an outsized impact on results. While these swings may normalize over longer periods, the increasing contribution of parlays and single-event concentration has amplified quarterly volatility, creating meaningful fluctuations in revenue and profitability. This structural exposure makes DraftKings’ earnings stream inherently less stable.
Another headwind is the company’s expansion into prediction markets, an area where DraftKings openly acknowledges it lacks historical data on customer lifetime value, retention patterns or spend behavior. Management stated that initial retention for these products is likely to be weak and that payback periods must be materially shorter than traditional sports betting. Yet, the company is proceeding with investments in product development, customer service and early marketing before establishing reliable economic benchmarks. This introduces added execution risk at a time when investors are looking for tighter cost control and clearer return profiles.
Promotional intensity remains a challenge. The company has leaned on parlay-oriented promotions to support bet mix, but these incentives elevate customer acquisition and engagement costs. When combined with adverse sports outcomes, the increased promotional load could likely further strain margins. DraftKings is also layering on additional investment initiatives — including AI development and incremental spending in new and upcoming states. Although these initiatives expand long-term optionality, they create upward pressure on operating expenses in the near term.
Lowered FY25 Guidance Hurts DKNG’s Prospects
Adding to the unease, DraftKings materially reduced its fiscal 2025 guidance. The company expects fiscal 2025 revenues to be in the range of $5.9 billion to $6.1 billion, down from the prior expectation of $6.2 billion to $6.4 billion. It expects fiscal 2025 adjusted EBITDA to be between $450 million and $550 million compared with the prior expectation of $800 million to $900 million.
The Zacks Consensus Estimate for DKNG’s fiscal 2025 earnings per share has declined 43.4% in the past 60 days. This downward trend reflects weakening analyst confidence in the stock’s near-term prospects.
DKNG Earnings Estimate Trend
Image Source: Zacks Investment Research
Among other industry players, Boyd Gaming Corporation (BYD - Free Report) has experienced a 2.7% upward revision in its earnings estimates over the past 60 days, whereas estimates for Accel Entertainment, Inc. (ACEL - Free Report) and Bally’s Corporation (BALY - Free Report) have declined 37.8% and 8.3%, respectively.
Valuation Insights for DKNG Stock
DKNG stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 2.43, below the industry average of 2.70. Conversely, industry players, such as Accel Entertainment, Bally's, and Boyd Gaming, have P/S ratios of 0.63, 0.32, and 1.65, respectively.
Image Source: Zacks Investment Research
Our Take on DKNG Stock
While DraftKings’ recent share-price strength reflects improving engagement trends and the strategic value of its new media partnerships, the broader fundamental picture remains mixed. The company’s reduced fiscal 2025 outlook, rising investment commitments and uncertain economics around its upcoming product predictions all contribute to a cautious forward earnings profile. Persistent promotional intensity and elevated volatility tied to its evolving bet mix further complicate visibility.
Although DKNG trades at a modest discount to the industry on a P/S basis, the valuation does not fully offset the execution risks, guidance reset and ongoing estimate cuts that continue to weigh on sentiment. With earnings expectations deteriorating and the margin trajectory becoming more unpredictable, a cautious stance remains appropriate for the Zacks Rank #5 (Strong Sell) stock.
Image: Shutterstock
DraftKings Stock Up 26% in a Month: Should You Buy, Sell or Hold?
Key Takeaways
Shares of DraftKings Inc. (DKNG - Free Report) have gained 25.6% in the past month compared with the Zacks Gaming industry’s rise of 0.8% and the Zacks Consumer Discretionary sector’s growth of 1.2%.
DraftKings’ strong rebound over the past month has been underpinned by improving engagement metrics and renewed confidence in its long-term growth story. Continued momentum in customer engagement — particularly the expanding parlay mix — has reinforced confidence in the company’s margin trajectory, while strategic partnerships with ESPN and NBCUniversal have broadened DraftKings’ distribution and customer acquisition reach.
Although competitive dynamics surrounding emerging prediction markets continue to draw investor scrutiny, the combination of expanding product capabilities, strengthened media distribution and sustained improvement in underlying customer behavior has likely contributed to the appreciation in DKNG shares.
DKNG One-Month Price Performance
Image Source: Zacks Investment Research
Despite the momentum, several underlying fundamentals suggest caution. The company reported dismal fiscal third-quarter performance, with more than $300 million in unfavorable sports outcomes dragging on revenues and pressuring adjusted EBITDA. DraftKings subsequently cut its fiscal 2025 revenue and EBITDA outlook, signaling softer visibility ahead. At the same time, spending tied to its unproven predictions product introduces additional uncertainty.
In parallel, downward estimate revisions have accelerated following the fiscal third-quarter miss and guidance cut. With earnings visibility weakening and execution risks rising, the risk-reward profile appears unfavorable at current levels. Let's delve deeper.
Key Headwinds Weighing on DKNG Stock
One of the most pressing concerns for DraftKings is the mounting unpredictability embedded in its business model. Management noted that a small number of NFL outcomes had an outsized impact on results. While these swings may normalize over longer periods, the increasing contribution of parlays and single-event concentration has amplified quarterly volatility, creating meaningful fluctuations in revenue and profitability. This structural exposure makes DraftKings’ earnings stream inherently less stable.
Another headwind is the company’s expansion into prediction markets, an area where DraftKings openly acknowledges it lacks historical data on customer lifetime value, retention patterns or spend behavior. Management stated that initial retention for these products is likely to be weak and that payback periods must be materially shorter than traditional sports betting. Yet, the company is proceeding with investments in product development, customer service and early marketing before establishing reliable economic benchmarks. This introduces added execution risk at a time when investors are looking for tighter cost control and clearer return profiles.
Promotional intensity remains a challenge. The company has leaned on parlay-oriented promotions to support bet mix, but these incentives elevate customer acquisition and engagement costs. When combined with adverse sports outcomes, the increased promotional load could likely further strain margins. DraftKings is also layering on additional investment initiatives — including AI development and incremental spending in new and upcoming states. Although these initiatives expand long-term optionality, they create upward pressure on operating expenses in the near term.
Lowered FY25 Guidance Hurts DKNG’s Prospects
Adding to the unease, DraftKings materially reduced its fiscal 2025 guidance. The company expects fiscal 2025 revenues to be in the range of $5.9 billion to $6.1 billion, down from the prior expectation of $6.2 billion to $6.4 billion. It expects fiscal 2025 adjusted EBITDA to be between $450 million and $550 million compared with the prior expectation of $800 million to $900 million.
The Zacks Consensus Estimate for DKNG’s fiscal 2025 earnings per share has declined 43.4% in the past 60 days. This downward trend reflects weakening analyst confidence in the stock’s near-term prospects.
DKNG Earnings Estimate Trend
Image Source: Zacks Investment Research
Among other industry players, Boyd Gaming Corporation (BYD - Free Report) has experienced a 2.7% upward revision in its earnings estimates over the past 60 days, whereas estimates for Accel Entertainment, Inc. (ACEL - Free Report) and Bally’s Corporation (BALY - Free Report) have declined 37.8% and 8.3%, respectively.
Valuation Insights for DKNG Stock
DKNG stock is currently trading at a discount. It is currently trading at a forward 12-month price-to-sales (P/S) multiple of 2.43, below the industry average of 2.70. Conversely, industry players, such as Accel Entertainment, Bally's, and Boyd Gaming, have P/S ratios of 0.63, 0.32, and 1.65, respectively.
Image Source: Zacks Investment Research
Our Take on DKNG Stock
While DraftKings’ recent share-price strength reflects improving engagement trends and the strategic value of its new media partnerships, the broader fundamental picture remains mixed. The company’s reduced fiscal 2025 outlook, rising investment commitments and uncertain economics around its upcoming product predictions all contribute to a cautious forward earnings profile. Persistent promotional intensity and elevated volatility tied to its evolving bet mix further complicate visibility.
Although DKNG trades at a modest discount to the industry on a P/S basis, the valuation does not fully offset the execution risks, guidance reset and ongoing estimate cuts that continue to weigh on sentiment. With earnings expectations deteriorating and the margin trajectory becoming more unpredictable, a cautious stance remains appropriate for the Zacks Rank #5 (Strong Sell) stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.