DrafkKings Stock (DKNG) Underperforming Ahead of Earnings – The Latest Look

DraftKings stock (NASDAQ:DKNG) is 26.25% lower YTD heading into today’s earnings, painting a rather bleak picture for DKNG bulls. With the decline in the stock extending to 42% on a 1 year basis, the warter could prove pivotal in shaping sentiment through the remainder of the year.

Expectations for the quarter are for $0.09 EPS and $1.99B revenue, implying a sequential step-up that requires both favorable outcomes and disciplined promotional spending.

The setup creates asymmetric risk: a beat on reported numbers may still disappoint if guidance for 2026 embeds continued volatility from sports outcomes and regulatory friction. The stock trades at $26.30, down 24% year-to-date and 51% from its 52-week high of $53.61, after three consecutive quarters of guidance resets drove estimates lower.

Options markets price a 15.9% post-earnings move, triple the stock’s historical average reaction of 5.0%, reflecting elevated uncertainty around both the Q4 print and forward commentary. The valuation discount to analyst targets of $44.81 assumes management can articulate a path to structural margin expansion that decouples profitability from short-term hold variance.

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Consensus Estimates

Consensus expectations for Q4 reflect a material sequential improvement from Q3’s $1.14B revenue, driven by seasonally stronger NFL and college football betting activity through December. The $1.99B revenue estimate implies DraftKings must deliver approximately $1.86B-$2.06B to meet the low and high ends of its most recent full-year guidance range.

The gap between consensus revenue of $1.99B and the implied Q4 requirement from guidance creates minimal buffer for a miss. Management’s November commentary tied the FY2025 EBITDA reduction to outcomes and taxes rather than engagement weakness, but provided no explicit Q4 guidance to anchor expectations.

Management Guidance & Commentary

“We are pleased with the underlying health and momentum of our business, as demonstrated by strong customer engagement and acquisition efficiency. However, customer-friendly outcomes and an increased tax rate have impacted our near-term profitability.”

Management’s November guidance reset to $5.9B-$6.1B revenue (midpoint $6.0B) and $450M-$550M adjusted EBITDA (midpoint $500M) marked the second material cut of 2025, following a May reduction from the original February framework. The company attributed the change to sports outcomes that favored bettors, particularly visible in Sportsbook revenue pressure despite handle growth.

The guidance framing created a narrative tension: if outcomes are the primary driver of variance, profitability should revert as hold normalizes. If taxes and regulatory costs are structural, margins face a permanent headwind. Management’s emphasis on “underlying health” and “momentum” suggests the former, but the market’s 16.9% post-Q3 selloff indicates investors are pricing the latter until proven otherwise.

Analyst Price Targets & Ratings

Wall Street maintains a bullish stance despite recent volatility, with 80% of analysts rating shares a Buy or Strong Buy. The consensus target of $44.81 implies 70% upside from current levels, though this assumes management can restore credibility on profitability forecasting after a year of repeated guidance resets.

Sector & Peer Comparison

DraftKings trades at a $13.09B market cap with negative profitability metrics, a valuation that reflects scale and market position rather than current earnings power. Flutter Entertainment, the parent of FanDuel and DraftKings’ primary competitor, operates at a $40B market cap with positive profit margins of 8.5%, demonstrating that the online sports betting model can generate sustainable profitability at scale.

Earnings Track Record

DraftKings has beaten EPS estimates in 11 of the last 20 quarters, a 55% hit rate that suggests modest execution consistency. The average surprise of -71.2% reflects the magnitude of misses when they occur, particularly visible in Q3 2025’s -2500% surprise when the company reported -$0.26 versus -$0.01 consensus.

The track record reveals a critical dynamic: beats on reported EPS have not consistently translated to positive stock reactions. Q2 2025 delivered a beat but the stock declined 2.1% the next day, while Q3’s miss triggered a 16.9% selloff.

Post-Earnings Price Movement History

DraftKings has posted negative next-day price reactions in five of the last six earnings reports, with an average move of -5.0% regardless of whether the company beat or missed estimates. The pattern suggests the market is systematically discounting reported results in favor of forward guidance and management commentary on profitability trajectory.

Expected Move & Implied Volatility

The options market’s 15.9% expected move for DraftKings post-earnings is triple the stock’s historical average reaction of 5.0%, indicating heightened uncertainty around the event. The implied range of $22.12 to $30.48 brackets the stock’s recent two-year low of $25.01 on the downside and approaches resistance levels on the upside.

Expert Predictions & What to Watch

Key Outlook: Guidance Will Drive the Trade

The central constraint facing DraftKings is the market’s loss of confidence in management’s ability to forecast profitability. The company entered 2025 with a $950M adjusted EBITDA midpoint and exited at $500M, a 47% reduction driven by outcomes and taxes.

Key Metrics to Watch

The Q4 print and 2026 guidance will test whether DraftKings can restore credibility on profitability forecasting after a year of repeated resets. The company’s structural advantages in brand, product, and scale remain intact, but the market has lost patience with execution volatility. A conservative guide that embeds continued outcomes risk will likely pressure the stock toward new lows, while a confident framework demonstrating margin expansion could catalyze a recovery. Understanding the difference between trading and investing is crucial when evaluating DraftKings’ long-term prospects versus short-term earnings volatility. Whether you’re a stock market speculator in your approach to DraftKings, the upcoming earnings report will likely determine the stock’s trajectory for the remainder of 2026.