DraftKings Stock Jumps 5% on Bank of America Upgrade to Buy
DraftKings (DKNG) saw its stock rise by 5% after Bank of America upgraded its rating from Neutral to Buy. Analyst Julie Hoover set a $27 price target, suggesting a 45% potential upside and calling the 47% year-over-year pullback an attractive entry point for investors.
The upgrade reflects a shift in Wall Street sentiment toward DraftKings, which has faced challenges due to uncertainty around prediction markets (PMs) and unfavorable NFL outcomes. Hoover believes these concerns are easing, creating a favorable risk-reward scenario. She highlights DraftKings' strong position as the third-largest player in the prediction market space, which could generate $400 million in fees by 2027, with an additional $200 million to $400 million from market-making activities.
If prediction markets remain viable, BofA estimates significant revenue potential. Conversely, if regulators shut them down, Hoover argues the stock's valuation multiple could improve due to the removal of regulatory uncertainty. DraftKings' early success in PMs could also pave the way for expansion into other large markets, such as crypto trading.
Bank of America noted that Wall Street estimates for DraftKings appear to be bottoming out. While the firm lowered its 2026 EBITDA estimate from $625 million to $500 million due to higher-than-expected PM investments, it raised its 2027 EBITDA estimate to $1.15 billion, driven by stronger core sportsbook performance and market-making contributions. Hoover suggested DraftKings could soon guide 2027 EBITDA in the $1.0 billion to $1.2 billion range.
BofA's $27 price target is based on a 12x multiple of its 2027 EV/EBITDA estimates, a modest discount compared to other market disruptors. Hoover believes the market's reaction to recent NFL headwinds and PM spending ambiguity has been overdone, creating a buying opportunity. However, the firm cautioned that stronger cost discipline will be needed to support higher margins and better cash flow in the long term.