A major Wall Street firm downgraded both stocks.
The two leading sports betting stocks, DraftKings (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT), the parent of FanDuel, were both moving lower on Tuesday, spurred by the same catalyst.
Both stocks got downgraded by analysts at BofA from ratings of buy to neutral, which likely led to their stock prices plummeting.
DraftKings fell about 5% on Tuesday to around $29 per share, while Flutter dropped roughly 4% to $221 per share.
In lowering its rating to neutral, BofA reduced DraftKings price target from $48 per share to $35 per share. That would still be about a 21% gain over the current share price. DraftKings still has a median price target of $51 per share, which is some 73% higher than the current level.
On Flutter, BofA dropped its price target from $325 per share to $250 per share. That would represent a roughly 13% gain over the next 12 months. Flutter has a median price target of about $331 per share, which suggests 49% upside.
What factors are giving BofA analysts pause about these gambling stocks?
DraftKings and FanDuel face challenges
In downgrading these two stocks, BofA cited several chief concerns. BofA analysts said the sports outcomes in the third and fourth quarters raise concerns about earnings for both companies. BofA, according to Investing.com, said that “hold rates” have weakened so far this NFL season, and that could hurt profits.
The hold rate is basically the profit margins that sportsbooks anticipate when determining the odds. So lower hold rates essentially mean that there are more “customer-friendly” outcomes, which, in sports betting company parlance, means winning bets.
Further, according to BofA, DraftKings has lost market share in its iGaming division, with promotional costs and taxes eating into margins. Tax risks were cited as an issue for both DraftKings and Flutter.
In addition, according to The Fly, BofA analysts cited concerns about the threat of prediction markets for both DraftKings and FanDuel. They said it is not just about the potential to lose market share; it’s also because it could lead to higher marketing costs.
BofA lowered DraftKings 2026 EBITDA estimate to $1 billion from $1.26 billion, according to Investing.com. It dropped Flutter’s 2026 EBITDA forecast to $3.66 billion from $4.24 billion.
DraftKings just achieved GAAP profitability for the first time in the second quarter of 2025. The stock is down 22% YTD and has a forward P/E of 16. It will be interesting to see if they can maintain that momentum when they report Q3 earnings on November 6.
Flutter has been profitable for the past three quarters. The stock is down about 14% YTD and has a forward P/E of about 20. Flutter reports Q3 earnings on November 12.
