DKNG : Buy Into Weakness, Cramer Says !

JC888
10-08

On 03 Oct 2025, CNBC's "Mad Money" host Jim Cramer declared $DraftKings Inc.(DKNG)$ share price plunge a compelling buying opportunity, urging investors not to shy away but to consider entering the stock amidst market overreactions.

His argument centred mainly around the fact that competition from online “prediction markets” is not a significant threat to DKNG’s business.

He considers concerns over “prediction markets” to be overstated and suggests establishing a small position ahead of the upcoming earnings release, slated for 06 Nov 2025.

What Are “Online” Prediction Markets ?

Prediction markets have a long history, with informal versions dating back at least 1,000 years, where people bet on various outcomes such as military battles, royal successions, and political events.

“Online” prediction markets first surfaced prominently with the launch of the Iowa Electronic Markets in 1988.

It was an academic experiment associated with University of Iowa that allowed real money trading on election outcomes.

Early 2000s saw growth with platforms like Intrade (launched in 2001) that traded contracts on various events until it faced increasing regulatory issues that led to it ceasing operations in 2013.

In recent years, new blockchain-based platforms like Polymarket and fully regulated exchanges like Kalshi have attracted more users, expanding topics beyond politics to sports, finance, and entertainment.

Top 5 Prediction Markets.

  • Polymarket - not listed on US exchanges.

  • Kalshi - not listed on US exchanges.

  • PredictIt - not listed on US exchanges.

  • Robinhood's prediction market partnership (via Kalshi) - $Robinhood(HOOD)$ is listed, but the prediction market operated through Kalshi remains private.

  • Manifold Markets -- not listed on US exchanges.

Associated Risks.

User / customers should be cautious given the (a) legal grey areas, (b) addictive nature, (c) lack of protections, (d) potential for manipulation, and (e) speculative risk inherent in online prediction markets.

Online prediction markets like Polymarket and Kalshi are treated more like stock exchanges rather than gambling companies.

This is because they:

  • Let users bet on a variety of outcomes.

  • Benefit from lighter regulation.

By contrast, DKNG must secure state licenses for sports betting.

DKNG’s Earnings.

DKNG has delivered strong results in August 2025.

  • Earnings per share (diluted) : was $0.30, significantly surpassing the $0.16 consensus estimate and showing notable improvement from its Q2 2024's $0.10; that’s a +200% YoY gain. (see below)

  • Revenue: was $1.513 billion vs analyst expectations of $1.43 billion (exceeded by about +6.0%) vs Q1 2024’s $1.104 billion; that’s a +37% YoY gain. (see below)

Q3 2025 Guidance.

The company also presented a positive outlook for Q3 2025 during Q2 earnings conference.

  • Revenue: maintains revenue guidance at $1.55 billion vs Q3 2024’s $1.095 billion; that’s a +41.6% YoY growth.

  • Expects adjusted EBITDA near the midpoint of $800 – $900 million.

  • Q3 Guidance reflects confidence in continued strong growth and profitability for the remainder of 2025.

Despite the “stellar” earnings, DKNG shares have dropped more than -20% from late August 2025 peaks. (see below)

Cramer believes:

  • Sellers are overreacting.

  • Noted that prediction markets are still limited compared to DKNG’ offerings.

  • These platforms operate in states where DKNG does not have access yet.

Separately, analyst notes highlight that much of Kalshi’s business comes from Texas & California, states where DKNG currently isn’t licensed.

Further, a report from Oppenheimer:

  • Suggests that 40-50% of Kalshi’s volume originates from Robinhood, pointing to a newer, less-experienced audience.

  • Argues that prediction markets may eventually drive more users to established sportsbooks like DKNG, as seen after the launch of ESPNBet.

Prediction markets are currently facing legal scrutiny and could encounter stricter regulation in the future.

The uncertain legal status of these online platforms highlights the risks for investors considering selling DKNG stock.

Betting Industry.

It is said that business could be nurtured and grow for every possible industry; it is no exception for the “betting” industry as well.

According to Grand View Research:

Global Market.

  • Global sports betting market was valued around USD 100.9 billion - 103 billion in 2024, with online sports betting accounting for roughly USD 78.9 billion of that amount. (see below)

  • The market is expected to grow at a CAGR (2025 - 2030) of +11% by 2030.

US Market.

  • In 2024, the US sports betting market generated approximately $13.7 billion in revenue, marking a record and about a +25% increase from 2023's $11 billion.

  • The total betting handle (amount wagered) nationally was nearly $148 billion in 2024, with over 95% of bets placed online.

  • For the first 3 quarters of 2025, the market continues to see strong growth, with estimates around $10 billion - $11 billion in sports betting revenue so far, supported by expanding legalization in states and growing digital adoption.

  • The market is forecast to grow at a compound annual growth rate (CAGR) of about +10.9% from 2025 to 2030, potentially reaching $33 billion by 2030.

In a slowing US economy where hiring is increasingly low & living costs increasingly high , people may turn to online betting, seeking financial rewards while enjoying sports, driven by easy access and entertainment value despite potential financial risks.

Therein lies the potentials of Draftking - agree ?

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  • Do you think online betting will gain traction as US economy continues to be sluggish’?

  • Do you think DKNG is a “safer” bet than online prediction markets that has a higher associated risk in light of a more precarious business environment?

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