DraftKings faces growing skepticism on Wall Street over its nearly $1 billion prediction market investment, with three banks downgrading the sports betting operator following its disappointing third-quarter earnings.
JPMorgan, UBS and Stifel lowered their ratings for DraftKings to neutral or hold, questioning whether the spending will deliver the returns management expects amid legal and competitive uncertainty.
DraftKings shares plunged 21.3% Friday to a new 52-week low, following the company’s sharply reduced 2026 profit forecast. Its prediction market business is expected to generate $900 million to $1.05 billion in combined adjusted EBITDA losses through 2027.
Stifel analyst Jeffrey Stantial downgraded DraftKings to hold from buy and cut his price target to $21 from $32, calling it a “show-me story” that could take several quarters to regain investors’ confidence.
While calling the prediction market strategy “sound,” Stantial noted that DraftKings has missed its initial full-year guidance three consecutive years. Investors need to see sustained customer profitability, stable trading market share and greater regulatory clarity before assigning value to the new business, he wrote.
