Stifel has adjusted its view on DraftKings Inc. (NASDAQ:DKNG), cutting its price target to $40 from $44 while retaining a Buy rating. The change comes amid recent market turbulence for the online sports-betting and consumer-predictions operator, which is trading at $22.33 and remains well below its 52-week high of $53.61.
The firm pointed to a 14% single-day decline on Friday that followed investor skepticism about the company's guidance. That drop forms part of a broader short-term selloff: InvestingPro data cited by Stifel shows the shares fell 19.76% over the past week. InvestingPro also indicates the stock is currently undervalued when measured against its Fair Value assessment.
Management described its outlook as ultra-conservative, but concerns persisted among market participants. Stifel highlighted investor unease around the total addressable market for DraftKings' prediction markets, a deceleration in fourth-quarter net gaming revenue growth linked to higher promotional activity, and a track record of prior guidance misses.
The firm framed the near-term investor question around whether the recent selloff might act as a clearing event ahead of DraftKings' March 2 Investor Day. Even after trimming and de-risking its estimates, Stifel said it remained cautious because of possible negative catalysts tied to Kalshi product developments and regulatory issues.
Operational expectations from Stifel include a rebound in online sports betting handle across the combined second and third quarters, and a pick-up in DraftKings Predictions download momentum in the second half of 2026 after planned product improvements. The firm expects those dynamics to gradually restore investor confidence if they materialize.
On profitability metrics, DraftKings continues to report a robust gross profit margin of 76.11%. Analysts surveyed expect earnings per share of $1.32 for fiscal year 2026. Stifel nonetheless flagged rising promotional spend and elevated customer acquisition costs as principal risks that could hinder recovery. The firm acknowledged that several competitors have signaled moderation in such costs in fiscal 2026, which could ease sector-wide pressures.
Stifel's new $40 target is derived from an updated discounted cash flow analysis. The firm noted revenue growth of nearly 27% underpins part of the valuation picture, and referenced an analyst consensus recommendation of 1.54, classified as Buy, in InvestingPro’s data. InvestingPro also identified additional factors that could influence DraftKings' valuation.
Recent company results have been mixed relative to guidance and market reaction. DraftKings reported fiscal fourth-quarter 2025 earnings that exceeded analyst expectations: EPS came in at $0.25, versus a forecast of $0.18, representing a 38.89% beat. Revenue for the quarter was $1.99 billion, narrowly above the predicted $1.98 billion.
Despite that earnings outperformance, several brokerages have trimmed price targets. Truist Securities reduced its target to $33, citing concerns over the company’s guidance. TD Cowen lowered its price target to $30, pointing to costs associated with market expansion. Bernstein SocGen Group cut its target to $28 because of worries about visibility into growth. Guggenheim set a new target of $37, noting the company’s 43% year-over-year revenue growth.
These analyst moves underscore diverging views on DraftKings’ medium-term trajectory: operational metrics and margin strength are juxtaposed against promotional intensity, customer acquisition trends, product execution risks, and potential regulatory developments.
As investors evaluate the stock ahead of the company’s investor event, the market will be watching whether handle acceleration, moderation in promotional spending, improved product download momentum, and any clarity on regulatory or third-party product developments can translate into a more constructive outlook for DraftKings.