Why DraftKings Plunged Today

Key Points

• Privately held Kalshi had record sports-betting volumes this past weekend.

• The venture-backed betting platform could become an increasing threat to existing sports-betting leaders.

• Tuesday's consumer sentiment reading also fell flat, harming any stock related to consumer spending.

• 10 stocks we like better than DraftKings ›

Shares of sports betting and iGaming giant DraftKings (NASDAQ: DKNG) fell 10.2% on Tuesday as of 12:32 p.m. ET.

DraftKings didn't have any company-specific news today, but was rather affected by the success of an up-and-coming privately owned competitor. Oh, and worsening consumer sentiment data didn't help, either.

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Kalshi is in DraftKings' rearview

Investors might not have heard of the betting platform Kalshi, as the company, which was founded in 2018 and backed by a number of high-profile venture capital firms, is still private. Kalshi initially unveiled its trading platform in mid-2021, and was primarily geared toward giving investors the ability to bet on real-world events, such as economic data or political happenings.

However, Kalshi has more recently made a push into real-time sports betting. This past weekend, Kalshi posted a record trading volume on Saturday, only to then exceed that record on Sunday. The all-time high trading was notable, as Kalshi hadn't posted record trading volume since the November 2024 presidential election, nearly a year ago.

Surging sports betting volumes on Kalshi could be a competitive threat to DraftKings and its public competitors, which were also in the red today. While DraftKings generally reported strong results last quarter on a year-over-year basis, the company did show some signs of potential deceleration.

For instance, while DraftKings' sports book handle revenue was up 45% last quarter, that seemed to come from take rate increases, as overall sports book betting volumes were only up 11%. Additionally, second-quarter unique visitors flattened out relative to the prior quarter.

In addition to the positive Kalshi data, today also saw a worse-than-expected September consumer sentiment reading from The Conference Board. That negatively affected most consumer discretionary stocks, DraftKings included.

Image source: Getty Images.

DraftKings and consumer stocks under pressure

DraftKings currently trades at 28 times this year's earnings expectations and 18.6 times 2026 earnings estimates. That's actually not expensive for a growth company, but if a growth company begins decelerating or seeing margin compression, the risks of a bigger drawdown increase.

DraftKings is still a leader in the space and should continue growing, but near-term competitive and macro uncertainty puts shares at risk of further downside, even after today's downdraft.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.