Shares of DraftKings Inc (NASDAQ:DKNG) are trading lower Friday after Guggenheim cut its price target to $42 from $45 and after the Commodity Futures Trading Commission said it will draft "clear rules" for prediction markets, scrapping proposals that targeted sports- and politics-linked event contracts.
Here’s what investors need to know.
How Regulatory Clarity Could Reshape DraftKings’ Future
Guggenheim has lowered its price target on DraftKings to $42 from $45 while maintaining a Buy rating on the shares. This adjustment follows the CFTC’s announcement that it will draft “clear rules” for prediction markets, which includes withdrawing a proposal that prohibited sports and politics-related contracts.
The CFTC’s Chair, Michael S. Selig, emphasized the need for regulatory clarity, stating that the existing framework has been difficult to apply and has failed market participants. This policy reversal could impact how DraftKings and other companies in the sector operate, potentially leading to increased competition or changes in market dynamics.
Is Robinhood The Most Dangerous Competitor For DKNG?
Robinhood Markets Inc (NASDAQ:HOOD) has been pushing sports event contracts inside its brokerage app via Kalshi, including in 2025 rolling out pro and Power 4 college football markets in a dedicated hub. Because DraftKings operates under state-by-state gaming licenses and taxes, it can't match a nationally scalable, CFTC-style product on friction or price.
Robinhood has processed more than 11 billion contracts and is generating roughly $100 million in annualized revenue from prediction markets.
Exchange-style Pricing Pressures Sportsbook
Event contracts are priced in cents, settle at $0 or $1, and can be sold before the game ends, mechanics that look more like trading than betting. Robinhood has charged as little as 1 cent per contract.
Kalshi payouts also often beat DraftKings, signaling potential margin compression. Kalshi has also recently expanded into spreads, totals and player props which are high-margin categories for sportsbooks.
What’s Next?
Kalshi's record NFL playoff volume, including via Robinhood, reinforces the market-share risk, while state actions add uncertainty, including a Massachusetts ruling forced Kalshi to block sports contracts in the state. DraftKings reports earnings Feb. 12.
DraftKings Technical Analysis
Currently, DraftKings is trading 17.3% below its 20-day simple moving average (SMA) and 20.9% below its 100-day SMA, indicating a bearish trend. Over the past 12 months, shares have decreased by 35.69%, and they are currently positioned closer to their 52-week lows than highs, reflecting ongoing weakness in the stock.
The RSI is at 33.64, which is considered neutral territory, while the MACD is below its signal line, indicating bearish pressure on the stock. The combination of neutral RSI and bearish MACD suggests mixed momentum, reflecting uncertainty in the stock’s near-term outlook.
- Key Resistance: $32.00
- Key Support: $26.00
DKNG’s Business Model
DraftKings got its start in 2012 as an innovator in daily fantasy sports. Following a Supreme Court ruling in 2018 that allowed states to legalize online sports wagering, the company expanded into online sports and casino gambling, where it generally holds the number-two or -three revenue share position across states where it competes.
Currently, DraftKings operates in 28 states for online or retail sports betting and in five states for i-gaming, reaching around 40% of Canada’s population. The company’s recent challenges, including regulatory shifts and market pressures, highlight the competitive landscape in which it operates.
DraftKings Earnings Preview
Investors are looking ahead to the next earnings report on Feb. 12.
- EPS Estimate: 37 cents (Up from 14 cents YoY)
- Revenue Estimate: $1.96 billion (Up from $1.39 billion YoY)
Analyst Consensus & Recent Actions: The stock carries a Buy Rating with an average price target of $46.88. Recent analyst moves include:
- Stifel: Buy (Lowers Target to $44.00) (Jan. 30)
- Guggenheim: Buy (Lowers Target to $42.00) (Jan. 29)
- Morgan Stanley: Overweight (Raises Target to $53.00) (Jan. 16)
Top ETF Exposure
- Tremblant Global ETF (NYSE:TOGA): 4.15% Weight
- Roundhill Sports Betting & iGaming ETF (NYSE:BETZ): 5.81% Weight
- Janus Henderson Transformational Growth ETF (NASDAQ:JXX): 4.71% Weight
Significance: Because DKNG carries significant weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.
DKNG Shares Slide Friday
DKNG Price Action: DraftKings shares were down 8.55% at $27.38 at the time of publication on Friday, according to Benzinga Pro data.
Image: Shutterstock
