TD Cowen has cut its price target for DraftKings Inc. to $30 from $45, while retaining a Buy recommendation on the sports-betting operator. The new valuation is based on a multiple of 20 times the firm's fiscal 2026 EBITDA estimate, according to the analyst note.
The updated target comes after DraftKings reported fourth-quarter results that beat street expectations but included forward-looking guidance that factors in costs related to expanding its prediction market business - expenditures that the company expects will not yield near-term benefits.
Operationally, the quarter contained several bright spots. Sportsbook revenue outperformed analyst forecasts as higher monetization amplified robust volume growth. Handle rose 13% year-over-year in the period, reaching nearly $17 billion, while revenue expanded at a faster clip as DraftKings converted a greater share of wagering into net gaming revenue.
Management reported gross gaming revenue on a hold just above 12%, and said net gross revenue margin widened to roughly 8%, an improvement of about 250 basis points versus the prior year. The company attributed part of the margin expansion to favorable sports outcomes in the fourth quarter.
Executives also cited product and promotional moves that helped results: the parlay mix increased almost 500 basis points year-over-year, and tighter promotional optimization contributed to lifting net gross revenue margin.
DraftKings disclosed fiscal fourth-quarter 2025 earnings per share of $0.25, topping the consensus EPS estimate of $0.18 by 38.89%. Revenue for the quarter came in at $1.99 billion, narrowly ahead of the $1.98 billion forecast.
Despite the positive beat on both EPS and revenue, the company's stock fell significantly following the release, reflecting investor focus on the guidance around expansion costs and the timeline for returns.
Other analyst reactions accompanied TD Cowen's move. Guggenheim lowered its price target to $37 from $42 while maintaining a Buy rating after the quarterly report. Guggenheim noted that the reported $1,989 million in revenue represented 43% year-over-year growth, which aligned with consensus but was slightly below Guggenheim's own estimate.
Bernstein SocGen Group trimmed its target to $28 from $32, maintaining an Outperform rating. The firm flagged reduced near-term visibility following DraftKings' guidance, signaling that investors remain in search of clearer signals around when the company's investments will translate into returns.
The picture from this round of results and analyst updates is mixed: solid top-line growth and margin gains in the quarter were offset in market reaction by guidance that incorporates extra near-term spending for product expansion. Analysts have adjusted their valuations accordingly while many left positive ratings intact, reflecting a balance between current operating momentum and the uncertainty tied to planned investments.