DraftKings reports Q2 results tomorrow after the close, entering the print with a stock down 9% over the past month, a short base that has quietly unwound, and analyst targets sitting well above where shares trade today.
The most notable shift in positioning has been on the short side. Short interest fell sharply in the back half of July — from roughly 41.7 million shares around July 22 to just under 39.2 million by August 4, a decline of about 5.4% over that stretch. At 7.9% of free float, the short base remains meaningful, but the direction of travel is clearly lower heading into the event. Borrowing costs confirm the retreat: the cost to borrow has dropped 31% over the week to just 0.30%, and the lending pool is far from stressed, with availability running above 1,000% — more than ten shares available for every one currently borrowed. That is a loose borrow market by any measure, and it signals that the recent cover activity is not being driven by a squeeze. Shorts are choosing to step aside ahead of earnings.
Options traders are not particularly hedged, and that itself is noteworthy. The put/call ratio is running at 0.41, fractionally below its 20-day average and well away from the defensive readings seen earlier in the summer — the ratio touched 0.47 in mid-July. With a z-score of -0.69, options positioning is actually marginally more bullish than usual. Closest peer fell 3.8% on the week, and dropped nearly 13%, while and bucked the tape with gains above 10%. The divergence across the gaming complex suggests stock-specific catalysts, not sector-wide sentiment, are driving flows — which puts tomorrow's print squarely in focus.
The Street remains constructively positioned, though target prices have drifted lower recently. JPMorgan lifted its target to $34 from $31 in mid-July, maintaining Overweight. Since then, Stifel, Truist, and Wells Fargo all trimmed targets — by modest amounts, to $38, $29, and $29 respectively — while keeping positive ratings intact. The consensus mean target of $34.84 implies roughly 48% upside from current levels at $23.61, a gap that reflects genuine bull conviction rather than stale numbers. The factor scores support that read: the forward EPS year-on-year growth rank sits at the 95th percentile, and analyst recommendation differentiation scores at the 98th percentile — meaning the Street is more uniformly positive on DKNG than on almost any other name in the universe. The EV/EBITDA multiple has compressed slightly over the past month, now at 12.6x, while the P/E of 16.8x has also eased — valuation is moving in the right direction for bulls.
The bull case rests on DraftKings' market-leading position in North American sports betting and iGaming, its push into prediction markets, and a forward earnings growth trajectory that few gaming peers can match. Bears point to slowing net revenue growth, potential iGaming market share erosion, and the drag from heavy customer acquisition spending on near-term margins. The ORTEX short score has drifted lower over the past two weeks — from 48.4 on July 22 to 47.0 today — consistent with the unwinding of short positions and a modest improvement in the overall risk profile ahead of the release.
The prior earnings print on May 7 produced a 6.7% one-day gain and a 5.1% five-day follow-through. Tomorrow's release will test whether the recent pullback from $30 has created enough of a reset for that kind of response, or whether the bear case around acquisition costs and iGaming competition is the story the market chooses to trade.
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