DraftKings Must Show Usage and Retention Data to Dispel Prediction Market Concerns, BofA Says

MT Newswires Live00:02

DraftKings (DKNG) is unlikely call out a material impact from prediction markets, but it is crucial to show usage and retention data to counter this narrative weighing on the stock, BofA Securities said in a Tuesday note.

The company's stock is down 21% year-to-date on concerns about slowing handle and competitive pressure, as well as potential cannibalization from prediction markets, the firm said.

BofA expects DraftKings' Q4 to beat significantly, but lowered its 2026 earnings before interest, taxes, depreciation, and amortization estimate to about $850 million from its prior forecast of $1 billion and below the Street's $1 billion expectation.

While there hasn't been a big marketing push, it seems like DraftKings could be learning into prediction markets more given its new Crypto.com partnership and its Predictions app reaching the top 10 in sports on Feb. 8, according to the report.

Near-term, this could result in higher investment, BofA said, adding that the company's ownership of Railbird and its capacity to vertically integrate could be an advantage over time. BofA also believes DraftKings is gaining notable National Basketball Association and parlay share.

The company's Q4 results are due Thursday.

BofA has a neutral rating on DraftKings with a $37.50 price target.

Price: 27.16, Change: -0.06, Percent Change: -0.24

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