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- The Betting App Got Benched, But The Margin Story Is Still In The Game
The Betting App Got Benched, But The Margin Story Is Still In The Game
The stock is down hard, but better hold, lower promo burn, and a new product angle keep it live.
You are not buying this for comfort. You are buying it because the stock has been cut down to a level where the upside finally looks interesting again. The market is focused on slowing handle, prediction-market noise, and another year of waiting for cleaner profits. That is exactly why the setup is worth your attention now.
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What Just Happened
The stock got cheaper while the business kept improving
DraftKings (NASDAQ: DKNG) is trading around $23, down roughly 30% over the past year and about 35% year to date. That drawdown happened even as the company kept growing revenue and pushing toward stronger EBITDA.
Simply Wall St’s current narrative fair value sits around $35.95, implying the stock is trading well below what the long-term growth story supports.
The last quarter was strong, but the market wanted more
In Q4 2025, DraftKings reported revenue of $1.989 billion, up 43% year over year. Full-year 2026 guidance came in at $6.5 billion to $6.9 billion in revenue and $700 million to $900 million in adjusted EBITDA.
That is still a serious growth and profitability setup, but the stock sold off because investors were already looking ahead to tougher comps and the new prediction-markets threat.
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What The Business Actually Does
The simple version
DraftKings runs online sports betting, iGaming, fantasy sports, and related gaming products.
Why that matters more now
The old version of the story was simple: spend hard, acquire users, and grow revenue fast. The newer version is better. DraftKings is now leaning more on pricing, in-play betting, personalization, and product depth to improve monetization without lighting promotional dollars on fire.
That shift matters because the market no longer rewards “growth at any cost” in this category. It rewards operators that can turn user engagement into cleaner margins.
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Why The Market Cares Again
1) Hold is improving
Benchmark noted operator-level results showing handle down 28.5% year over year while revenue still rose 13%, because hold expanded to 10.7% from 6.8% a year earlier.
That is a big deal. It shows DraftKings is making more money on the bets it is taking, even in a softer volume environment.
2) Promotions are getting more disciplined
Part of the handle pressure reflects harder comparisons and less aggressive promo spending. That is not a weakness. That is exactly what margin-focused investors wanted to see. Benchmark’s view was that EBITDA matters more than raw handle growth right now.
3) Prediction markets are now part of the upside, not just the threat
Prediction markets hurt sentiment in 2025 because investors feared they would steal DraftKings’ lunch. The company’s response was to buy Railbird and build its own predictions product.
That changes the debate. Now the question is execution, not helplessness. If DraftKings prices this well and integrates it cleanly, the new category helps margins instead of hurting them.
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What The Financials Are Signaling
This is closer to a real earnings story now
The important change is not just revenue growth. It is the path to profitability. DraftKings’ 2026 guidance for up to $900 million in adjusted EBITDA tells you this is no longer just a user-growth story. The business is finally being judged on earnings power, and that is a healthier place for the stock to be.
The Street is still supportive, but estimates are wobbling
On one hand, analysts still broadly lean bullish. The average brokerage recommendation sits around a Buy-equivalent level, and many price targets remain above the current stock price.
On the other hand, the Zacks consensus estimate for current-year earnings has fallen 33.1% over the past month, which is why Zacks now shows a Strong Sell rank. That split is exactly what creates the opportunity here. Sentiment is weak, but the long-term story is not broken.
The Valuation Problem No One Should Ignore
The stock looks cheap for a reason
DraftKings is not down here because the market forgot it exists. It is down because investors are worried about prediction markets, moderation in handle, and whether profitability keeps slipping further out.
The important point is that you are no longer paying peak optimism
At $23, the stock is being priced like the story has stalled. It has not. Revenue is still growing, monetization is improving, and the company is building into a new adjacent market. If the predictions product works and sportsbook margins hold, this stock is mispriced.
What Needs To Happen Next
Keep proving EBITDA matters more than handle
DraftKings does not need to win every volume chart. It needs to keep showing that better pricing, better hold, and less promo burn drive cleaner profits. That is the main thing you should watch.
Launch predictions without fumbling the product
Prediction markets are now central to the next leg of the story. The company saw the threat and moved. Good. Now it needs to offer better pricing and a better product than the incumbents. That is the real test.
Keep product depth working
DraftKings still has a real edge in live betting, personalization, and the super-app strategy. That is what supports higher ARPU and better retention over time. If that edge fades, the stock stays cheap.
The Risks You Should Take Seriously
Prediction markets can still steal the narrative
If DraftKings’ predictions product is late, weak, or poorly priced, the market will assume Kalshi and others have the better model.
Regulatory and tax pressure are real
This business always carries policy risk, and that risk has not gone away.
The stock needs proof, not promises
This is no longer the phase where investors reward ambition. They want clean execution and better profits.
How I’d Frame A Position
Buy the weakness, not the bounce
DraftKings is now a contrarian growth bet with improving margins. That is a much better setup than the old “pay anything for user growth” version of the story.
If you already own it, hold it. If you are not in, start building a position here instead of waiting for the crowd to feel better. The valuation is finally doing some of the work for you.
Bottom Line
DraftKings is not broken. The stock is. That is the whole opportunity. Revenue is still growing, hold is improving, promotional discipline is helping margins, and the prediction-markets threat is now also a growth lever if management executes.
Action Recap
✅ What’s working: better hold, improving EBITDA, disciplined promo spend, and a real plan for prediction markets
✅ What to watch: predictions rollout, margin progression, and whether EBITDA keeps improving faster than handle
⚠️ Big risk: predictions execution disappoints and the market decides the disruption threat is still winning
🧭 Best mindset: Buy here in stages. Hold if you already own it. Do not wait for perfect sentiment because that is when the easy upside is gone.
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider