Analyst: DraftKings Can Be Long-Term Prediction Markets Winner

• DraftKings is ramping up its prediction market offering
• It’s already unlocking cost benefits
• Analyst says “many” existing DraftKings customers could flock to company’s event contracts platform

DraftKings (NASDAQ: DKNG) is a relatively new player on the prediction market stage having launched DraftKings Predictions last December, but the company is already making strides in the event contracts space, prompting one analyst to say the operator is poised to be long-term winner in the arena.

Freedom Capital Markets analyst Nick McKay initiated coverage of DraftKings with a “buy” rating and a 12-month price target of $30, implying upside of about 20% from the May 20 close. He flagged DraftKings’ “Super App” as a driver of long-term prediction markets growth for the gaming company.

Among the Company’s 10.5 million unique customers, we would expect many to gravitate towards DraftKings’ offering given: (1) the inclusion of Predictions within the Super App, (2) the single account and wallet, (3) the more familiar betslip interface, with Predictions betting options gradually becoming indistinguishable from traditional Sportsbook offerings, and (4) the Company’s expertise in live market bets and combos (parlays),” notes McKay.

The bullishness on DraftKings’ prediction market opportunity runs counter to some recent sell-side commentary on the stock.

Last week, BNP Paribas hit DraftKings with a rare “sell” rating, citing competitive pressure from the likes of Kalshi and Polymarket.

Prediction Markets Expands DraftKings Playing Field

For now, prediction markets are regulated at the federal level, meaning operators don’t have to deal with a hodgepodge of state licenses and regulations. That also positions companies, including DraftKings, to reach a broader customer base than is available with traditional sports betting.

“States that have traditionally opposed legalizing sports gambling such as California and Texas will have become part of the addressable audience. The gross margins of prediction market bets are estimated to be 10% to 30% higher than (sports betting),” says the analyst.

DraftKings itself has highlighted the margin opportunity available with prediction markets, confirming it sees runway for event contract margins to exceed those associated with online sports wagering.

Favorable Risk/Reward for DraftKings Stock

Shares of DraftKings are off 29.3% over the past year, but the stock has perked up of late, gaining nearly 8% over the past month. The operator posted April earnings before interest, taxes, depreciation and amortization (EBITDA) of $100 million and McKay sees a favorable risk/reward setup in the shares.

“For FY:26, we are modeling revenue and adjusted EBITDA of $6.75 billion and $800 million vs. guidance of $6.5 billion to $6.9 billion and $700 million to $900 million,”: concludes the Freedom Capital Markets analyst. “For FY:27, our estimates are $7.5 billion and $1.17 billion, with the core profitability implied by FY:26 guidance potentially north of $1 billion after excluding $200 million to $300 million of prediction markets spend.”