Is DraftKings Stock a Buy After Its 21% Drop?
DraftKings fell 21% after cutting its 2026 profit outlook to fund its prediction-market push. The core business still earns cash and the stock looks cheap on 2027 guidance, but we rate it a hold until the Predictions bet shows a payoff.
Maz Vantage Research ·
Key points
- DraftKings stock fell 21.3% on Nov. 6 to $18.51 after the company cut its 2026 outlook and said it will spend $650 million to $700 million this year on its prediction-market product.
- The core sports-betting and casino business is still growing and profitable. Management guides it to $1.15 billion to $1.25 billion of adjusted EBITDA in 2027.
- At about 11 times 2027 adjusted EBITDA guidance, the stock is cheap if the plan holds. After a deep guidance cut and with a weak position against Kalshi, we rate it a hold, not a buy.
DraftKings (NASDAQ: DKNG) lost more than a fifth of its value on Friday, Nov. 6. The shares closed at $18.51, down 21.3%, after trading as low as $16.55 during the session. The trigger was a third-quarter report that missed estimates and cut full-year profit guidance by more than two-thirds at the midpoint, mostly to fund DraftKings Predictions, its new event-contract exchange. Our view: the selloff has made the stock look cheap on next year's numbers, but those numbers depend on a costly bet whose payoff is still unproven. We rate DraftKings a hold.
What happened
DraftKings reported after the close on Nov. 5. Revenue rose 16% from a year earlier to $1.33 billion. That was short of the roughly $1.39 billion analysts expected, according to Invezz. The adjusted loss was $0.53 per share against a consensus loss of $0.21, according to Zacks. On a GAAP basis (the standard accounting rules), the net loss widened to $468.7 million, or $0.94 per share, from $256.8 million a year earlier.
The bigger problem was the outlook. DraftKings now expects 2026 revenue of $6.35 billion to $6.55 billion, down from $6.5 billion to $6.9 billion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation, excluding stock pay and one-off items) is now guided to $175 million to $275 million. The previous range was $700 million to $900 million.
DraftKings quarterly revenueThis content is hosted by datawrapper.dwcdn.net, which may set its own cookies. It is not loaded until you allow it.
The selling spread across the group during the day. Flutter Entertainment, owner of FanDuel, traded as much as 10.7% lower before closing down 1.5% at $81.70.
| Metric | Q3 2026 | Year earlier / prior view | Change |
|---|---|---|---|
| Revenue | $1,329M | $1,144M (consensus ~$1,390M) | +16% y/y; ~4% below consensus |
| Adjusted EPS | -$0.53 | Consensus -$0.21 | Miss |
| Adjusted EBITDA | -$316.9M | -$126.5M | Larger loss |
| Monthly unique payers | 4.1M | n/a | +13% y/y |
| 2026 revenue guidance | $6.35B-$6.55B | $6.5B-$6.9B | Midpoint -3.7% |
| 2026 adj. EBITDA guidance | $175M-$275M | $700M-$900M | Midpoint -72% |
Sources: DraftKings Q3 2026 release; consensus from Invezz and Zacks.
The core business is still working
Strip out Predictions and the picture is steadier. Sports revenue rose 31.5% to $783.6 million, helped by a higher sportsbook net revenue margin (the share of money wagered that DraftKings keeps), which rose to 5.6% from 5.2%. Sports consumer volume, a measure of total money bet that now includes prediction markets, grew 21.9% to $13.9 billion. Online casino (iGaming) revenue was nearly flat, up 2.1% to $460.9 million.
Management guides the core business to $875 million to $925 million of adjusted EBITDA in 2026 and $1.15 billion to $1.25 billion in 2027. Chief financial officer Alan Ellingson said the release shows "our core business continues to generate significant free cash flow," and that this cash is being used to fund Predictions.
The Predictions bet is the whole story
Predictions lets customers trade contracts on the outcome of events, including sports, under federal commodities rules rather than state gambling licences. DraftKings says more than 1.6 million customers have engaged with it so far this year. But revenue from the product will be immaterial in 2026 because sign-up promotions offset most of what it earns.
The cost is large. Selling and marketing expense on a GAAP basis rose 68% from a year earlier to $605.7 million in the third quarter, equal to 46% of revenue. Chief executive Jason Robins told Bloomberg that most of the $650 million to $700 million investment went to acquiring new customers.
For 2027, DraftKings guides Predictions to $650 million to $750 million of revenue and a smaller investment of $250 million to $350 million. Total 2027 guidance is revenue of $7.35 billion to $7.75 billion, about 17% growth at the midpoint, and adjusted EBITDA of $800 million to $1 billion.
DraftKings core EBITDA vs Predictions investmentThis content is hosted by datawrapper.dwcdn.net, which may set its own cookies. It is not loaded until you allow it.
The bear case is that DraftKings is paying heavily to be a distant follower. Needham estimated that Kalshi took 76% of sports prediction-market volume in the NFL's opening week in September, against 3% for DraftKings, according to TIKR. If customers acquired this year do not stay and trade, the 2027 step-down in spending may not arrive. Regulation is a second risk. Trade outlet RG.org flagged the legal uncertainty around sports event contracts, which could take years of court rulings to settle. The guidance cut also drew a law-firm investigation notice from Levi & Korsinsky on Nov. 6.
The bull case is that the spend is front-loaded and the core business pays for it. If DraftKings delivers its 2027 guidance, adjusted EBITDA roughly quadruples from the 2026 midpoint.
Valuation
At $18.51, DraftKings has a market value of about $9.2 billion. Adding $2.19 billion of convertible notes and term loans and subtracting $1.10 billion of cash as of Sept. 30 gives an enterprise value (market value plus net debt) of about $10.3 billion.
| Measure | Value | Basis |
|---|---|---|
| Share price (Nov. 6 close) | $18.51 | Down 46% year to date |
| EV / 2026 adj. EBITDA | ~46x | Guidance midpoint $225M |
| EV / 2027 adj. EBITDA | ~11.4x | Guidance midpoint $900M |
| EV / 2027 core adj. EBITDA | ~8.6x | Core midpoint $1.2B |
| P/E on 2027 EPS | ~21.6x | Consensus $0.86 (13 analysts), likely to fall |
| Average analyst target | $32.33 | 75% above the price; median $29 |
Two cautions apply. First, consensus figures had not caught up with the cut: the average 2026 revenue estimate of $6.66 billion sits above the new guidance range, so expect forward EPS estimates to drop. Second, analyst targets were already falling before the report. Needham cut its target to $30 from $35 on Nov. 2 and kept a buy rating, according to TIKR.
Maz Vantage's quant grade for DraftKings was 2.37 out of 5, a Hold, as of Nov. 1, before the drop. Growth scored strongly at 4.16, while valuation (2.64), profitability (2.39), financial health (2.02) and momentum (2.67) were all below the midpoint.
Our verdict: hold
DraftKings is a hold at $18.51. On 2027 guidance, the stock trades at about 11.4 times adjusted EBITDA, and under 9 times if you credit only the core business. That is not demanding for a company growing revenue in the mid-teens. But the verdict rests on whether management hits a 2027 plan it only just set, only three months after it reaffirmed its old 2026 revenue range. It also rests on whether a product with an estimated 3% share of NFL opening-week volume can earn back $650 million to $700 million of spending. We would want evidence that Predictions spending is falling and its customers are paying back before calling the stock a buy.
What would change our view
- Fourth-quarter Predictions spend. Guidance is $175 million to $225 million. A figure at or below the low end would support the 2027 plan; an overrun would undercut it.
- Market share against Kalshi and Polymarket. Third-party volume data showing DraftKings' share of sports event contracts rising toward double digits would strengthen the bull case.
- Regulatory rulings. Any court or Commodity Futures Trading Commission decision restricting sports event contracts would threaten the Predictions revenue guided for 2027.
- Next earnings, expected around Feb. 11, 2027. Watch whether DraftKings reaffirms its $800 million to $1 billion 2027 adjusted EBITDA range.
Prices as of the market close at 4:00 p.m. ET on Friday, Nov. 6, 2026.
Data sources: Maz Vantage's market data and consensus estimates, DraftKings' Q3 2026 earnings release, and the news sources listed below.
This article is general research, not personal investment advice. It does not consider your goals, timeline or tax situation.
AI disclosure: written with the help of AI tools from market data and the sources listed.
Sources: RG.org, "DraftKings Q3 2026 Results: Revenue Up 16%, Guidance Cut," Nov. 6, 2026, https://rg.org/news/gambling-industry/draftkings-q3-2026-results-predictions-guidance-shares-fall; DraftKings, "DraftKings Reports Third Quarter Revenue Growth of 16%," Form 8-K Exhibit 99.1, Nov. 5, 2026, https://www.sec.gov/Archives/edgar/data/0001883685/000188368526000039/q326-prx8kexx991.htm; The Wall Street Journal, "DraftKings Cuts Outlook as It Pours More Money Into Prediction Markets," Nov. 5, 2026, https://www.wsj.com/business/earnings/draftkings-cuts-outlook-as-it-pours-more-money-into-prediction-markets-140041b3; Zacks Investment Research, "DraftKings (DKNG) Reports Q3 Loss, Misses Revenue Estimates," Nov. 5, 2026, https://www.zacks.com/stock/news/3024899/draftkings-dkng-reports-q3-loss-misses-revenue-estimates; Invezz, "DraftKings stock just lost 20%: the real story isn't the earnings miss," Nov. 6, 2026, https://invezz.com/news/2026/11/06/draftkings-stock-just-lost-20-the-real-story-isnt-the-earnings-miss/; Bloomberg Technology, "Investing in Prediction Markets Will Pay Off, DraftKings CEO Says," Nov. 6, 2026, https://www.youtube.com/watch?v=G4yyD0buRxg; MarketWatch, "DraftKings' expensive bet on prediction markets is crushing its stock," Nov. 6, 2026, https://www.marketwatch.com/story/draftkings-expensive-bet-on-prediction-markets-is-crushing-its-stock-277bee0d; TIKR, "Needham's $30 Target Says DraftKings' Selloff Went Too Far," November 2026, https://www.tikr.com/blog/needhams-30-target-says-draftkings-selloff-went-too-far; Levi & Korsinsky via PR Newswire, Nov. 6, 2026, https://www.prnewswire.com/news-releases/draftkings-investigation-notice-levi--korsinsky-notifies-investors-of-pending-investigation-into-draftkings-dkng-302932410.html