DKNG dropped 5.2% on Tuesday, capping a 6.8% weekly decline to $23.81, as the market sharpened its focus on a structural threat the company has been slow to address: the rapid rise of regulated prediction markets.
The selling this week has a clear catalyst. News that Fanatics struck a deal to offer official World Cup prediction markets in the US landed alongside a blunt analyst piece titled "4 Betting Stocks to Avoid as Prediction Markets Take Over." That followed the Q1 earnings report two weeks ago, when DraftKings cut its revenue guidance amid regulatory and competitive shifts — a moment that crystallised the bear case. The stock rallied 6.7% on the day of the Q1 print, only to give much of that back over the following two weeks.
Short positioning tells a nuanced story. At 7.3% of the free float, short interest is meaningful but broadly unchanged on the week — up just 0.4% — after a notable step-down in early May when around 5.5 million shares left the short register. That exodus, concentrated around the May 8–11 window, almost certainly reflected shorts covering ahead of earnings. Since the print, the short book has crept back but has not rebuilt aggressively. Cost to borrow remains negligible at 0.41% — barely above the general collateral rate — and availability is extremely comfortable at 789%, with over 234 million shares sitting in the lending pool. There is no squeeze dynamic here; the borrow market is essentially open. The ORTEX short score of 46.6 sits squarely mid-range, consistent with a moderately shorted name rather than a high-conviction short thesis. Options tell the opposite story: the put/call ratio has fallen to 0.39, its 52-week low — about 1.4 standard deviations below its 20-day average. Call volume is running unusually hot relative to puts, a signal that some participants are reaching for recovery rather than hedging against further downside.
The Street remains broadly constructive, but the post-earnings analyst flurry reveals quiet divergence. Morgan Stanley kept its Overweight but trimmed its target to $39 from $40, conceding some valuation headroom. Barclays and Mizuho both raised targets — to $35 and $45 respectively — while Guggenheim clipped its figure to $35 from $37. Freedom Capital Markets initiated at Buy with a $30 target on May 21. The mean target across the Street is $34.71, which implies nearly 46% upside from current levels, a premium that says more about how far the stock has fallen than about fresh conviction. Valuation multiples have compressed sharply — the EV/EBITDA multiple is down nearly a full turn over 30 days — which reflects both the guidance cut and the ongoing multiple de-rating. The 12-month forward EPS growth percentile ranks in the 95th percentile of the universe, underlining that the growth trajectory itself is not disputed, only whether competition and regulation will erode the addressable market before DraftKings can capture it.
Insider activity adds a layer of concern. Co-founder and director Matthew Kalish sold nearly 1.9 million shares on May 15 for roughly $31.7 million, at an average price of around $16.59. That execution price is well below the current $23.81 close, suggesting the transaction reflects a previously established 10b5-1 plan rather than a discretionary sale — though the volume, representing 0.39% of the company, is nonetheless notable. Broader insider net activity over the past 90 days is positive in share terms at 2.5 million net shares, largely driven by equity award grants across the board, so the Kalish sale does not neatly define the insider picture.
Peer performance underscores that DKNG's weakness is not purely sector-wide. FLUT, its closest trading peer with 70% correlation, also fell — down 3.7% on the day and 3.6% on the week — suggesting some shared exposure to the prediction-market narrative. But PENN gained 3.5% on the week and CZR added 2.8%, pointing to a divergence between pure-play digital sports betting names and the broader gaming complex. The next scheduled earnings event is not until August 6, leaving a ten-week window in which the prediction-market competitive dynamic will remain the defining lens for the stock.
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