Gaming stocks have performed weakly so far into 2026, said Truist Securities analyst Barry Jonas in a February 3 investor note.
The stocks’ debility was, continued Jonas, in defiance of “consistent and solid” casino trends — outside of Las Vegas. He expected digital-gambling results to be strong and regional revenues to be in line with expectations.
Jonas’s most favored name in gambling, looking ahead to fourth-quarter earnings from 2025, was DraftKings. He also liked such “quality names” as Churchill Downs, Sportradar, Genius Sports, Gaming & Leisure Properties, and Vici Properties.
The analyst’s preference for DraftKings was predicated on more favorable hold percentages on NFL play in late 2025. His numbers showed handle up 10 percent, but revenue shooting 40 percent higher than in the fourth quarter of 2024. So Jonas ratcheted up his cash-flow projection for DraftKings from $223 million to $325 million. Wall Street’s consensus for the company had been around $255 million.
Also expected to benefit was FanDuel parent Flutter Entertainment. Jonas moved his fourth-quarter cash-flow projection from $323 million (in line with Wall Street sentiment) up to $340 million. He also nudged his cash-flow forecast for Flutter’s international operations to $919 million from $902 million. The Wall Street quarterly projection was for $898 million.
“Still, the stocks will likely react more so to each’s respective 2026 guidance, on top of wider commentary on prediction markets,” Jonas cautioned. His 2026 cash-flow forecasts for DraftKings and Flutter remained the same: $940 million for the former and $3.7 billion for the latter.
Looking at the present year, Jonas reported that in New York state, NFL handle was down three percent, but winnings were up six percent with a hold percentage 10.2 points. Despite two weeks of weak sub-seven percent hold in the Empire State, the week ending January 18 experienced a hold of 17.6 percent, resulting in books winning $96 million off $545 million wagered.
“We believe that weaker handle growth in New York January [online sports betting] data has spooked investors into thinking prediction market cannibalization is more prevalent and widespread than it may actually be,” Jonas ventured. He suggested other factors, such as sharp bettors, VIP play or tough comparisons on college football wagering.
New York, Jonas continued, “represents a higher mix of prediction market players staking higher than average amounts. We think more data over a wider timeframe is needed to suggest the OSB industry is in some form of structural decline, driven by prediction markets. We would highly doubt any earnings commentary will suggest a meaningful impact from prediction markets just yet.”
Even so, prediction markets were still the hottest topic in gambling, according to Jonas. Interactive-gaming stocks were, he said, weighed down by potential exposure to event contracts. Also, 89 percent of Kalshi revenues were coming from sports wagering, accelerating as NFL play heated up.
That said, most of the prediction markets, Jonas argued, were devouring sports betting in like-for-like markets, with most of the cannibalization occurring in California and Texas. Also affected with states with lots of sharps (such as New York) and thanks to college-age bettors collegiate football.
“With sports betting about to enter a seasonally slower period, we will look closely at prediction market trends,” Jonas wrote. “Additionally, with several state level court cases around sport prediction markets due for an update, potential legislative actions in the mix and a new CFTC chairman looking to flex his authority, there could be wider implications for the sports prediction [marketplace].”
Per Jonas’s data, prediction-market fees are modest compared to the gambling industry. Kalshi’s 2025 fees total $263.5 million. The analyst set that number against the Las Vegas Strip ($16 billion), regional United States casinos ($45 billion), $15 billion from traditional OSB, and $10 billion from igaming.
On the subject of traditional casinos, Jonas said that soft room rates on the Las Vegas Strip in the last quarter of 2025 were hardening into early 2026 flatness. Although the ConAgg expo in March has driven room rates nine percent higher, without ConAgg they are five percent down for March and four percent off in the first quarter overall.
Weekly comparisons are looking better in February and March, Jonas penned, but “we have not yet seen enough to think that the strong convention season will be able to more than offset the leisure weakness,” and leisure trade represents 80 percent of room nights. Despite less adverse declines, Jonas continued to expect room-rate softness to persist throughout the first quarter. Growth was seen as possible, even likely, in the second quarter and beyond.
Jonas’s Strip estimates remained unchanged for MGM Resorts International and Caesars Entertainment. Regarding MGM, the stasis “was more a reflection of expectations having reset lower sooner for [Caesars], which also could benefit more from regional upside than the Strip-centric MGM.”
A brighter spot were Las Vegas locals casinos, whose revenues were four percent up in 2025’s last trimester. “All this should translate to mostly inline quarters for our regional coverage, though we could see some modest upside in the Regionals,” Jonas penned, noting Caesars, Churchill Downs and Boyd Gaming as likely beneficiaries.
Jonas did not look for favorable comparisons in 2026’s first quarter. True, the previous year had seen adversity in the form of harsh weather and (unspecified) terrorist attacks. However, in 2026, “January weather has been very unfavorable so far (at least in the Northeast region) with February not off to a great start either.”
