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DraftKings Shares Have Dropped Sharply After Earnings. Is Now a Good Time to Invest?

DraftKings Shares Have Dropped Sharply After Earnings. Is Now a Good Time to Invest?

101 finance101 finance2026/02/17 18:15
By:101 finance

DraftKings Achieves First Annual Profit, But Shares Drop After Guidance

DraftKings (DKNG) reported its first annual profit for 2025, fueled by a record-breaking fourth quarter. Despite this milestone, the stock tumbled 13% late last week as investors responded to the company's cautious outlook for the upcoming year.

The sharp decline following the earnings release pushed DraftKings' 14-day relative strength index deep into oversold territory, catching the attention of bargain hunters seeking potential opportunities.

Related Updates from Barchart

DraftKings shares have fallen roughly 40% so far this year and are now valued at 22 times forward earnings. Jefferies recently described this valuation as an attractive entry point for long-term investors in a new research note.

DraftKings Stock Performance

Jefferies Maintains Optimism on DraftKings

DraftKings revealed in its earnings report that its user base held steady at 4.8 million during the fourth quarter, and its revenue forecast for 2026 was $0.4 million below analyst expectations.

Nevertheless, Jefferies analysts argue that the company's guidance is likely conservative, as it does not factor in DraftKings' expansion into prediction markets.

CEO Jason Robins reinforced this perspective during the earnings call, describing prediction markets as a significant new growth avenue for the company.

He believes this initiative will enable DraftKings to attract millions of new users, potentially boosting the stock price in the long run.

Potential Upside for DraftKings in 2026

Jefferies also supports buying DraftKings shares due to the company's swing to $136 million in net income for the fourth quarter, which they say highlights the strength of its core operations.

They note that demand for sports betting remains robust in the U.S., and DraftKings is well-positioned to maintain its leadership in this rapidly expanding sector.

Following the earnings report, Jefferies reiterated its "Buy" rating on DKNG and set a price target of $46, suggesting the stock could more than double by the end of 2026.

Options market activity appears to support this view. Contracts expiring on June 18 currently have an upper price target around $27, indicating the potential for a 22% gain over the next four months.

DraftKings Continues to Receive Strong Buy Ratings

DraftKings' cautious guidance has not discouraged other analysts on Wall Street. The consensus rating for DKNG remains at "Strong Buy," with an average price target near $43, implying the stock could more than double by the end of the year.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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