DraftKings Stock (DKNG) Hits New Low Ahead of Earnings

DraftKings stock (NASDAQ: DKNG) tumbled to a new low of $27.89 this week, as earnings await after today's market close. The stock's performance reflects a confluence of factors, including a recently filed federal lawsuit, analyst downgrades, and growing competitive pressures in the evolving online gaming landscape.

DraftKings is expected to report an EPS of -$0.26 for the quarter. This contrasts sharply with the positive EPS of $0.38 reported in the second quarter of 2025, when the company’s revenue soared to $1.513 billion, a 37% increase year-over-year.

The most immediate headwind facing DraftKings is a federal lawsuit alleging the illegal sharing of private user data, enabling harassment, and a subsequent cover-up. The suit, seeking over $13 million in damages, has spooked backers concerned about the potential financial and reputational damage. News of the lawsuit triggered a 7.3% drop in the stock price, highlighting the sensitivity to data privacy issues and corporate governance lapses.

Adding to the negative sentiment, Bank of America recently downgraded DraftKings' stock from “Buy” to “Neutral,” citing concerns over underperformance in iGaming, declining market share, and potential state-level tax headwinds. The downgrade also included a reduced price target of $35 per share, further dampening market confidence.

The emergence of prediction market platforms like Kalshi and Polymarket is also casting a shadow over DraftKings. These platforms, which allow users to bet on the outcome of various events, are gaining traction and attracting significant investment.

Analysts warn that these platforms could divert 5–10% of U.S. sports betting flow, particularly in states where traditional gambling remains unlicensed. DraftKings' acquisition of Railbird Technologies in October, aimed at entering the prediction markets sector, signals an attempt to mitigate this competitive threat, but the impact remains to be seen.

Despite the challenges, DraftKings has made some positive strides. The company recently secured a direct mobile sports betting license in Missouri, allowing it to operate independently across the state without partnerships with land-based casinos or sports teams.

This expansion, set to launch on December 1st, will mark DraftKings' 29th U.S. state for regulated sports betting operations. The news initially boosted the stock by 3.1%, showcasing the potential for growth in newly regulated markets.

While the prevailing sentiment surrounding DraftKings is cautious, a contrarian perspective suggests that the recent sell-off may be overdone. Berenberg analysts, for instance, upgraded DraftKings' stock to “Buy” in early October, arguing that the market's reaction to the threat of disruption from prediction markets was excessive. The core argument rests on the belief that DraftKings can deliver strong profit growth in the coming years as the market shifts its focus from revenue to profitability.

Furthermore, DraftKings' proven ability to navigate the complex regulatory landscape and secure market access in key states should not be overlooked. The company's strategic investments in technology and its established brand recognition provide a solid foundation for future growth.