Bank of America Upgrades DraftKings Stock to Buy After Recent Slide

After DraftKings' stock fell to $18.58 last Thursday, which was the lowest rate since April 2023, shareholders have some good news. 

Bank of America's Julie Hoover has upgraded the status of DraftKings stock from neutral to buy as of Monday and maintains the $27 price target. This news alone sent the stock up 5%, and more could come Tuesday. 

According to Hoover, since DraftKings is down 47% since last year, this allowed for the change in status. 

“We believe the recent underperformance is driven by concerns around unfavorable NFL outcomes and uncertainty around the magnitude of PM investment,” Hoover wrote on Monday. “In our view, the stock reaction is overdone, creating an attractive opportunity.”

DraftKings Prediction Markets Could Generate Hundreds of Millions

Another part of the win comes from DraftKings being in a good position regarding prediction markets. DraftKings is third in the prediction market space and could be in line for upwards of $400 million in fees and another $200 to $400 million in market-making profits. 

In terms of the prediction markets and online sports betting platforms cannibalizing each other, Hoover pointed to predictions volume growing slower than the sportsbook handle to start the year as a positive in that regard. 

Hoover now also believes that the sports betting handle in the second half of 2027 will see modest low-single-digit growth, which is an improvement from her original prediction of it falling. As a result, the EBITDA prediction is up $50 million this year and $75 million next year. 

However, if New Jersey's petition to the Supreme Court happens and they rule against sports contracts, that could lead to a re-rating. 

DraftKings Could Outpace Earnings Expectations

Another thing Hoover mentioned was that DraftKings could be set up to outpace earnings expectations, citing falling EBITDA forecasts. As a result, the EBITDA is set at $1.15 billion next year instead of $1.05 billion.