DraftKings Recovers Ground as Shorts Ease and Call Buyers Hold Firm

DKNG has clawed back most of the 12% slide flagged in last week's note, settling at $25.26 after a modest 0.4% weekly gain — and the notable development is that short sellers trimmed exposure into the bounce rather than pressed it.

Short interest edged down 1.4% on the week to 41.0 million shares, or 8.2% of the free float. That's a meaningful shift from the pattern seen through most of June, when the short book climbed steadily from around 36 million shares to a peak near 41.6 million. The month-over-month build is still 14%, so the aggregate positioning remains elevated — but the marginal pressure from new shorts has stalled. The borrow market backs that up. Availability has expanded sharply, running at 1,303% — more than thirteen shares available for every one already borrowed, up 23% from a week ago and the loosest lending conditions seen all year. Cost to borrow ticked up slightly to 0.41% but remains firmly in low territory, having eased 13% over the past month. There is no friction for new short sellers, but with availability this wide, the structural squeeze pressure that keeps many short-heavy names on edge is simply absent here.

Options positioning reinforces the same cautiously bullish tone. The put/call ratio closed at 0.39, fractionally below its 20-day average and essentially in line with the 52-week low of 0.37. That is in the same territory flagged in last week's note — call buyers have not retreated despite the stock sitting 18% below the UBS target of $49. The z-score of -0.46 is unremarkable, but the persistence of this skew through a 12% drawdown and partial recovery is at least consistent: options traders are not treating this as a name to hedge.

The Street remains broadly constructive, though price targets are scattered widely. Susquehanna trimmed its target by $1 to $31 on July 1 while keeping a Positive rating — a minor downward nudge rather than a change of view. Citizens raised its target last week to $36 from $34, and Guggenheim held at $35 with a Buy. The mean target across the analyst panel is $34.91, implying roughly 38% upside to current levels, though the range runs from $30 at TD Cowen up to $49 at UBS, which makes that mean a blunt instrument. The forward earnings momentum score ranks in the 95th percentile — the highest-conviction data point in the factor set — reflecting near-1,900% year-on-year forward EPS growth. The bear case centres on iGaming market share drag and the near-term EBITDA hit from high-profile sporting events driving outsized payouts; the bull case rests on prediction markets, geographic expansion, and improving unit economics. The ORTEX short score of 47.2 sits in the lower-mid range, consistent with moderate but not extreme short-side conviction.

Insider activity over the past 30 days has been uniformly directional: the CLO sold roughly $1.9 million worth of shares across two tranches on June 11, and the CEO and CFO both sold on June 1 alongside routine award activity. None of the trades carry a significance score above 2 out of 10, and the 90-day net is modestly positive at around $5 million in net value terms due to earlier award activity. The sells are consistent with a compensation vesting pattern rather than a directional view — but they are worth noting given the stock's level relative to analyst targets.

With Q1 results due August 6, the next identifiable catalyst is the July earnings season for adjacent names — FLUT gained 4.4% on the week while PENN added 4.2%, broadly tracking DKNG's modest bounce. August 6 is the date to watch: the prior three earnings reactions ranged from -2.8% to +6.7% on day one, and the bear case around World Cup-driven payouts and iGaming share trends gives the print genuine uncertainty in both directions.