Financial Analysts Offer Cautious View on DraftKings and Flutter Outlook

DraftKings (DKNG) Faces Hold Rate Headwinds

DraftKings received a downgraded rating from Bank of America (BofA), which shifted its rating from “Buy” to “Neutral.” BofA analyst Shaun Kelley cited structural issues with the “hold” rate, the percentage of money retained by the sportsbook after paying winnings, as the primary concern.

BofA expects a lower hold rate due to volatility, noting that the past two years have seen hold rates in the final three months of the year average 200 basis points lower due to sports results favorable to bettors, particularly in football. This weak hold in September and October led BofA to reduce DraftKings’ third and fourth-quarter EBITDA estimates by $150 million.

BofA also lowered its 2026 EBITDA forecast for DraftKings from $1.26 billion to $1 billion and dropped the price target from $40 to $35. The firm argues that the company’s long-term profit potential appears more restricted. The analysis also noted that DraftKings’ share of the U.S. iGaming market has fallen from 27% to 23% over two years.

Optimistic Long-Term View

Despite the near-term challenges, other analysts remain bullish on the long-term value. Firms like BMO Capital, Stifel, and Benchmark maintain a “Buy” or “Strong Buy” consensus. BMO analyst Brian J. Pitz believes the long-term opportunity for DraftKings is fundamentally unchanged. BMO views the stock as attractively valued at roughly 12.5 times the company’s estimated free cash flow (FCF) for 2026. Stifel also noted positive free cash flow trends. BMO reduced its price target slightly from $65 to $63 but maintained its Top-Pick status.

Flutter Entertainment (FLUT) Faces Tax and Growth Risks

Analysts at BofA showed similar caution toward Flutter Entertainment, the parent company of FanDuel. BofA downgraded Flutter from “Buy” to “Neutral” and reduced its third and fourth-quarter EBITDA estimate by $100 milliondue to the same poor hold performance impacting DraftKings.

Flutter is also facing concerns over slowing volume growth, with handle growth slowing to about 5% year-to-date. The firm also faces recurring tax risk in two key markets:

• U.S. Tax Risk: BofA believes that investors have not fully factored in the possibility of multiple U.S. states raising taxes on sports betting in 2026 as states seek to increase revenue.
• U.K. Tax Risk: Unlike DraftKings, Flutter has significant international operations and faces tax risk in its home market. Analysts speculate that the U.K.’s autumn budget on November 26 could include higher gaming taxes, which has historically resulted in negative pressure on Flutter’s stock.

BofA lowered Flutter’s 2026 EBITDA forecast from $4.24 billion to $3.66 billion and reduced the price target from $325 to $250.

Shared Industry Headwinds

Both DraftKings and Flutter are seen by analysts as being in a “perfect storm” of regulatory, tax, and competitive pressures. These shared challenges could potentially trigger a new price war in the U.S. sports betting market:

• Tax Uncertainty: The risk of state-level tax increases in 2026 is viewed as persistent and “never-ending.”
• Hold Volatility: The return of variable hold rates prompted BofA to reduce long-term profit projections for both companies.
• Prediction Markets: Both companies face challenges related to prediction markets. The emergence of these markets creates the specter of a potential price war, and regulatory issues persist. Some states have warned operators that entering prediction markets could jeopardize their existing betting licenses.