Bank of America Securities analyst Shaun C. Kelley downgraded both DraftKings Inc (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT) ahead of their upcoming earnings reports, citing mounting challenges in the sports betting sector.
The Sports Betting Analyst: Kelley downgraded DraftKings stock from Buy to Neutral and lowers the price target from $48 to $35.
He also downgraded Flutter stock from Buy to Neutral and lowered the price target from $325 to $250.
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DraftKings Downgrade: Items like unfavorable sports outcomes, underperformance in iGaming, tax headwinds and more could hurt DraftKings going forward, Kelley said in a new investor note.
"Relentless headwinds could recalibrate long-term earnings," Kelley said.
The analyst said DraftKings' structural hold doesn't "look so structural anymore," noting that third-quarter and fourth-quarter sports outcomes could lead to volatility in financials.
Kelley said DraftKings' model "is highly sensitive to Hold."
"Additionally, we think prediction markets present a challenging near-term narrative."
The analyst said even without the other headwinds, the stock would get downgraded "solely on prediction markets."
"The near-term event path and around PMs is challenging, with chances of a competitive marketing and price war rising, while OSB operators' decisions are constrained by regulation and legal maneuvering."
DraftKings reports third-quarter financial results on Nov. 6, after market close.
Flutter Downgrade: FanDuel owner Flutter gets downgraded based on risks to hold percentages, taxes and the competition from prediction markets.
"While FLUT is more diversified from some of these risks than DKNG, we think valuation will remain highly correlated near-term," Kelley said.
The analyst said FanDuel has under-realized on hold since 2023 and risks to hold could hurt annual EBITDA.
Kelley said FanDuel has also seen a slowdown in handle growth, which is currently below DraftKings’ year-to-date growth rate.
Flutter's international operations also face risks, with the company announcing a shutdown in India and a slower-than-expected ramp-up in Brazil.
Flutter will report third-quarter financial results on Nov. 12 after market close.
DKNG, FLUT Price Action: DraftKings stock is down 5.4% to $222.92 on Tuesday, with shares hitting new 52-week lows of $28.88 during the intraday trading session. DraftKings stock is down 20.2% year-to-date in 2025.
Flutter stock is down 3.5% to $222.92 on Tuesday versus a 52-week trading range of $196.88 to $313.68. Flutter stock is down 12.5% year-to-date in 2025.
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