Investment Firm Maintains Buy Rating Despite Lowered Revenue and EBITDA Projections
Guggenheim has lowered its price target on DraftKings Inc. (NASDAQ:DKNG) to $33 from $35 while maintaining a Buy rating on the stock. Trading at $24.03, the stock is down 30% year-to-date and sits roughly 51% below its 52-week high of $48.78, though InvestingPro analysis indicates the stock appears undervalued at current levels. The firm updated its financial model following DraftKings’ second-quarter 2026 earnings release while management reaffirmed its full-year 2026 outlook.
Q2 2026 Financial Results and Revenue Miss Factors
For the second quarter of 2026, DraftKings reported revenue of $1.44 billion—marking a 5% year-over-year decline that missed Guggenheim’s $1.55 billion estimate and consensus expectations of $1.51 billion. Earnings per share came in at $0.09, falling short of the estimated $0.11.
The revenue and earnings shortfall was primarily attributed to:
- Customer-Friendly Outcomes: Approximately $80 million in customer-friendly sports results.
- Predictions Reinvestment: Increased promotional reinvestment for the Predictions business totaling approximately $55 million.
Adjusted EBITDA reached $115 million, compared to Guggenheim’s estimate of $169 million and consensus expectations of $156 million. Despite near-term profitability challenges, InvestingPro data notes that the company maintains impressive gross profit margins of 76%, with analysts predicting full-year profitability. Following these results, Guggenheim revised its 2026 revenue estimate to $6.69 billion and adjusted EBITDA to $719 million.
Growth Metrics and Strong Underlying Demand
Despite the earnings miss, DraftKings highlighted several positive developments during the quarter, including strong customer growth, an 11% rise in sportsbook handle, and a nearly 75% year-over-year increase in customer acquisition. The company’s predictions business expanded significantly, serving over 600,000 customers and achieving a nearly fivefold increase in annualized volume between April and July. Management noted that underlying consumer demand remains robust with no discernible macroeconomic impacts, keeping a strong focus on cost discipline and operational efficiencies.
Reflecting continued confidence in the company’s long-term trajectory, Canaccord Genuity reiterated its Buy rating on DraftKings with a $44.00 price target. Management also expressed confidence by leaving its full-year 2026 guidance unchanged while remaining bullish on the opportunities within its predictions roadmap.
