DraftKings Upgrade Recasts Prediction Markets
DraftKings upgrade by Bank of America reframed prediction markets as fee and market-making revenue and boosted investor sentiment, drawing renewed flows.
KEY TAKEAWAYS
- Bank of America upgraded DraftKings to Buy with a $27 price target.
- BofA estimated $400 million of 2027 prediction-market fees and $200 million to $400 million market-making revenue.
- BofA cut 2026 adjusted EBITDA to $500 million and raised 2027 to $1.15 billion.
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DraftKings received an upgrade from Bank of America on Oct. 5, 2026, which reframed prediction markets as potential fee and market-making revenue streams rather than a threat. The upgrade coincided with adjustments to Bank of America’s near-term EBITDA forecasts.
Bank of America Upgrade and Thesis
Bank of America analyst Julie Hoover raised DraftKings to Buy and set a $27 price target. The bank presented prediction markets as a potential source of incremental fees and market-making revenue, estimating roughly $400 million in fees and $200 million to $400 million in market-making revenue for 2027. These figures depend on regulatory approval and commercial viability; regulatory closure could remove a related valuation overhang.
The bank also assessed that prediction markets are less likely to cannibalize DraftKings’ traditional sportsbook than previously feared. Since the start of the football season, sportsbook growth has outpaced that of prediction markets. Bank of America identified DraftKings as the third-largest participant in prediction markets, a position that could support scale for fees and market-making if allowed to operate.
Forecasts, Valuation, and Caveats
Bank of America lowered its 2026 adjusted EBITDA forecast to $500 million from $625 million but raised its 2027 forecast to $1.15 billion from $1.05 billion. The shift reflects investment in the newer business, stronger sportsbook performance, and anticipated market-making contributions that improve the later-year outlook.
The $27 price target is based on a 12-times multiple of estimated 2027 enterprise value to EBITDA (EV/EBITDA), a measure comparing enterprise value with earnings before interest, taxes, depreciation, and amortization. The bank noted the need for stronger cost discipline in DraftKings’ core business to support higher incremental margins and profit flow-through in 2028 and beyond.
The upgrade and forecast revisions come amid uncertainty around the newer business and unfavorable NFL outcomes that had weighed on DraftKings’ prior outlook. By repositioning prediction markets as a potential revenue driver rather than a risk, Bank of America offered a clearer view of how fee and market-making income might contribute to longer-term EBITDA. The extent to which this upside converts to durable profit depends on regulatory treatment and the company’s ability to scale margins.
