DraftKings, Flutter Among Top Consumer Cyclical Stocks to Buy, Says Morningstar
Posted on: February 20, 2026, 12:41h.
Last updated on: February 20, 2026, 12:41h.
- Both stocks are undervalued, says research firm
- Morningstar sees prediction markets gaining 3% of US online gaming market share by 2030
- Analyst says DraftKings’ leading position in the US could be durable over the long-term
Shares of sportsbook Goliaths DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT) are down 55.56% and 57.57%, respectively, over the past year as investors have fretted about an array of issues, including weak NFL hold and the rise of prediction markets.
Investors may be looking at both stocks as falling knives, but some analysts argue the carnage endured by the gaming equities has made the stocks deeply undervalued. In a new report on the top consumer discretionary stocks to buy, Morningstar notes Flutter trades at 55% discount to the research firm’s fair value estimate of $278 while DraftKings is 52% undervalued when measured against a fair value forecast of $47.
Specific to Flutter, analyst Dan Wasiolek praised the FanDuel owner for expanding earnings before interest, taxes, depreciation, and amortization (EBITDA) margins even as more rivals entered the US sports betting space.
We believe Flutter will be able to manage an ever-changing regulatory and competitive landscape,” notes the analyst. “It maintains strong EBITDA margins internationally, despite stringent regulation and industry maturation. Meanwhile, Flutter’s US brand, FanDuel, expanded its EBITDA margin to 8.7% in 2024 from 5.3% in 2023, even as Fanatics and ESPN have entered the market and invested meaningful capital.”
Even amid rising competition, FanDuel is the top or number two online sportsbook operator by market share in nearly all of the states in which it offers that service.
DraftKings Could Follow Similar Long-Term Path to Flutter
It’s common for retail investors to compare DraftKings and Flutter, but those comparisons often focus on FanDuel while excluding Flutter’s leadership in mature sports wagering market such as Australia, continental Europe, and the UK.
DraftKings doesn’t yet possess that geographic diversity, but Wasiolek believes the company can follow a similar path in the US to what Flutter achieved in international markets to generate “strong revenue share and profitability” over the next decade.
The analyst also points to the oft-mentioned catalyst of more states adding iGaming and sports betting as potential sparks for DraftKings over the long-term. Just this year, Maine surprisingly authorized internet casinos and Virginia could soon follow suit.
“We estimate the North American sports betting and i-gaming market will reach more than $50 billion in revenue by 2028 from over $22 billion in 2024,” says Wasiolek.
What About Prediction Markets?
These days, it’s impossible to discuss DraftKings and Flutter stocks without mentioning prediction markets. While data indicate that in states where DraftKings offers sports betting, Kalshi has taken minimal market share, there are still fears yes/no exchanges will take share from sportsbook operators over time.
DraftKings and FanDuel are new entrants to the prediction markets space, so they have some buffer in terms of lost sports wagering share and Wasiolek sees Flutter as being able to withstand that competitive threat.
“While we see prediction platforms amassing 3% of the US online gaming market by 2030, we don’t think Flutter’s 26% sales share will change much, as it launches predictive events in states where sports bets aren’t legal and offers its superior online sports product (parlays and in-game play),” concludes the analyst.
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