Morgan Stanley has lowered its price target for DraftKings from $39 to $36, citing weaker-than-expected near-term earnings, while maintaining its positive Overweight rating and confidence in the company’s long-term strategy, particularly its growing presence in prediction markets.
In a new research note covering several gaming companies, the investment bank forecast DraftKings will generate approximately $150 million in adjusted EBITDA for the second quarter, below Wall Street’s consensus estimate of roughly $175 million. Morgan Stanley also expects the operator to narrow its full-year EBITDA guidance to between $700 million and $800 million, compared with its previous range of $700 million to $900 million.
Analysts attributed the softer outlook largely to increased spending on customer acquisition for DraftKings’ prediction markets business, along with slightly weaker sportsbook margins following customer-friendly results during the FIFA World Cup.
Despite lowering its valuation, Morgan Stanley continues to see prediction markets as a significant long-term opportunity. The bank now expects the business to post an EBITDA loss of around $290 million in 2026, improving to a loss of roughly $40 million in 2027 before turning profitable with an estimated $125 million EBITDA gain in 2028.
The firm’s latest model expands beyond simple event contracts by factoring in combination trades, parlays, exchange fees and market-making activity, reflecting a broader view of how prediction markets could evolve into a meaningful revenue driver. This follows a sharp increase in customer activity during the recent World Cup, which boosted engagement across DraftKings’ prediction products.
DraftKings has continued investing heavily in the sector. In June, the company launched DKeX, its proprietary prediction markets exchange, integrating it directly into the unified DraftKings Sports & Casino platform. The company said the move gives it greater control over technology, pricing and customer experience while supporting continued nationwide expansion of its federally regulated prediction markets offering.
The broader investment community remains divided on DraftKings’ near-term prospects. Several analysts have recently adjusted their forecasts following customer-friendly sports outcomes, World Cup promotions and higher marketing costs, although many continue to see upside as prediction markets mature and expand across additional U.S. jurisdictions.