DraftKings Shakes Off Revenue Hit, Enters Prediction Markets

Core Viewpoint - DraftKings is launching a prediction market for sports outcomes, which could transform a competitive threat into a growth opportunity despite a recent cut in its full-year outlook due to unfavorable sports outcomes impacting revenue [2][3]. Company Developments - DraftKings reported an adjusted loss of 26 cents per share, matching estimates but widening from a loss of 17 cents a year ago. Sportsbook handle increased by 10% year-over-year to $11.4 billion, while sportsbook revenue fell by 9.3% to $596.1 million. Total revenue rose by 4.4% to $1.144 billion, driven by a 25% increase in iGaming revenue to $451.3 million [7]. - The company has lowered its full-year revenue outlook to a range of $5.9 billion to $6.1 billion from a previous range of $6.2 billion to $6.4 billion. Additionally, the outlook for full-year adjusted earnings before interest, taxes, depreciation, and amortization has been cut to a range of $450 million to $550 million from $800 million to $900 million [8]. Market Position and Strategy - DraftKings is set to launch its prediction market, pending license approvals, targeting nearly half of the U.S. population in states without access to online sports betting. This market allows traders to buy and sell contracts based on specific sports outcomes, potentially increasing engagement and revenue [4]. - The company has secured exclusive marketing agreements with ESPN and NBCUniversal, which are expected to enhance its market presence and drive growth [3]. Competitive Landscape - Robinhood has entered the sports prediction market, joining competitors like Kalshi and Polymarket, which recently received a $2 billion investment from Intercontinental Exchange [5]. - DraftKings has been named as Disney's official sportsbook and odds provider, effective December 1, following the early termination of the ESPN Bet deal with Penn Entertainment [9]. Stock Performance - Following the announcement of its new sportsbook partnership with ESPN, DraftKings' stock initially fell over 6% to a two-year low but later rebounded to a 1.7% gain. Canaccord and BTIG have adjusted their price targets for DKNG stock to $54 and $42, respectively, while maintaining buy ratings [10][11].