DraftKings: Oversold on the charts, cash-generative under the hood
Short-term fear meets long-term scale: why this pullback is an opportunity if you manage your levels
Numbers first, narratives second.
DraftKings DKNG 0.00%↑ just got hit hard. The daily chart shows a gap-down, momentum washed out, and price now living below every key moving average. That’s the “why now” for traders. Underneath, the business is bigger, cleaner, and steadily throwing off cash even as GAAP earnings swing with seasonality and promo cycles. The question is whether the current drawdown reflects a real shift in the industry or a temporary shock.
Recent headlines point to two drivers: a new prediction-market competitor (Kalshi) spooking investors and Illinois pushing through per-bet fees that operators are passing to customers. Analysts trimmed targets, but many still called the selloff overdone.
Key Takeaways (TL;DR)
TTM revenue: $5.41B, up ~26% YoY; TTM gross margin ~48.7%.
TTM operating income -$332M, but TTM operating cash flow $514M and TTM FCF ~$502M (capex light).
Balance sheet at 6/30/25: Cash & STI $1.26B, Total debt $1.91B → net debt ~$648M; current ratio ~1.34x.
SBC runs ~$361M TTM (~6.7% of revenue) still meaningful but coming down as a % of sales.
Latest quarter (Q2 FY25): positive GAAP NI ~$158M and positive operating income ~$169M, the profitability path is intact but seasonal.
Valuation check vs comps (P/S TTM): DKNG ~3.3x, Flutter/FLUT ~3.0x, CZR ~0.5x, PENN ~0.45x. Digital growth still commands a premium.
Technicals: Daily RSI sub-20, MACD deeply negative, price hugging the lower Bollinger band, ADX strong. Key supports: $33.4 (daily 1.618 ext) and ~$30 (weekly 0.786). First resistance band $39–42.
News overhangs: prediction-market noise and IL fee mechanics; both real, but likely manageable within DKNG’s scaled model.
Quick pause; now let’s unpack the business before we talk charts.
Pipelines & business/regulatory runway
For DraftKings, “pipeline” means new products, cross-sell (casino, parlays, same-game builders), and regulatory expansion state by state. The near-term regulatory story is less about new states and more about tax/fee regimes in existing ones, most notably Illinois, where a new fee structure led DKNG to implement a per-bet transaction fee (with carve-outs) to offset costs. This could pressure handle in the short run, but it protects unit economics and is being mirrored by peers. Longer term, operators are likely to adapt through pricing, product mix, and VIP segmentation.
On the product front, headlines about prediction markets (Kalshi) triggered the latest risk-off move. The selloff reflects uncertainty, not a broken model: regulators still need to decide how these markets fit, and large books like DKNG can replicate attractive features quickly if rules allow. Several analysts framed the drop as an overreaction.
Regulation evolves, scale adapts.
Fundamental analysis
Growth & margins
Revenue TTM: $5,409.6M; TTM growth ~25.8% vs the prior twelve months.
Gross profit TTM: $2,636.1M → gross margin ~48.7%.
Operating income TTM: -$332.1M (still negative) with the latest quarter positive (~$169M), illustrating seasonality and operating leverage building.
Net income TTM: -$304.6M; latest quarter positive ~$158M.
Expense mix (TTM as % of revenue):
Selling & Marketing ~23.8%
G&A ~14.3%
R&D ~7.9%
SBC ~6.7% of revenue ($361M TTM)
Cash generation
Operating cash flow TTM: $514M
Capex TTM: ~$12M (asset-light)
Free cash flow TTM: ~$502M
Balance sheet & liquidity (6/30/25)
Cash & short-term investments: $1,262M
Total debt: $1,910M → net debt ~ $648M
Current assets: $1,787M vs current liabilities $1,335M → current ratio ~1.34x
Equity: $1,010M; total liabilities: $3,465M
What it means: Revenue scale is now big enough to fund the business. GAAP profitability will be choppy, but consistent positive OCF and FCF de-risk the equity. The heaviest lever remains S&M, which has already normalized as a % of sales; if DKNG continues to hold share while moderating promos, operating margins should move toward breakeven to low-positive on a TTM basis.
The core engine is healthy and cash-generative. The statement of cash flows tells a stronger story than the income statement, and the balance sheet gives them room to navigate taxes, promos, and product pivots.
Competitive & sector context
Latest price-to-sales snapshots (trailing): DKNG ~3.3x, Flutter/FLUT ~3.0x, Caesars/CZR ~0.5x, PENN ~0.45x. That spread says the market still pays a premium for scaled, digital-first growth vs casino-heavy operators, while keeping DKNG roughly in line with Flutter’s group multiple.
Read-through: At ~3–3.5x sales and EV/Revenue around ~3.6x (using your share count, price on the chart, and net debt), DKNG isn’t “cheap,” but it’s not egregious given 20–30% topline growth and real FCF. Upside in the multiple probably requires visibility that regulatory fees get absorbed without losing share or that DKNG monetizes prediction-style products within the rules.
What’s new, and why the stock cracked
Prediction markets: Kalshi launched parlay-like contracts, which sparked a broad selloff in U.S. sportsbooks on perceived odds competition and regulatory arbitrage. Analysts at Morgan Stanley called the reaction overdone.
Illinois fees/taxes: DKNG announced per-bet fees to offset the new state levy; details include minimums and carve-outs that reduce customer pain at higher bet sizes/VIP tiers. Expect some friction near term, but operators are converging on similar approaches.
Street stance: A cluster of target cuts but many Buy/Outperform reiterations; the tone is “near-term messy, long-term intact.”
Signal over noise; focus on cash, share, and rulemaking.
Technical analysis
Structure & momentum
Daily: Trend turned down decisively. Price is below short and long EMAs with a gap-down on heavy volume. RSI ~19 is washed out; MACD is deeply negative; ADX ~34 says the downtrend is strong. Price is riding the lower Bollinger band; OBV rolled over; classic “panic leg” behavior.
Fib levels (daily): 1.618 extension sits near $33.4. Below that, 2.618 projects ~$26.7 if the selloff extends.
Weekly: Momentum rolled over but not broken structurally. Weekly Bollinger lower band ~mid-34s; Stoch RSI near the floor; Ichimoku has price well below the cloud with Tenkan/Kijun ~39–41 acting as first resistance. Weekly retracement: 0.786 near ~$30, with 0.382/0.236 at ~$39.6 / $43.1 (overhead supply).
Levels we care about
Support: $35 (spot/pivot), $33.4 (daily 1.618 ext), ~$30 (weekly 0.786).
Resistance: $39–42 (0.382 fib + Tenkan/Kijun + prior MA cluster). If reclaimed on a weekly close, momentum likely flips to mean-revert; then $45–46 becomes the next objective.
We’re statistically oversold into layered support, but trend is still down. Expect a reflex bounce toward $39–42 if $33–35 holds. Lose $30 on a weekly close and the next air-pocket opens toward the high-20s.
A trade approach
Positioning philosophy: Let the business quality and cash generation work for you, but respect the technical damage and regulatory news-flow risk.
Entry plan (scale-in)
Starter around $35–36 while daily RSI is sub-20.
Add near $33.5 if tagged (daily 1.618).
Final add only if weekly probes $30–31 and stabilizes intraday.
Invalidation / risk
Primary stop: Weekly close < $29.5 (below the weekly 0.786 and prior structure).
Soft stop: If price closes a full week below $33.4 and fails to reclaim it on the next.
Upside targets (6–18 months)
Base case: Reversion to $39–42 band.
Bull case: If $42 holds on a retest and fundamentals stay on pace, $46–48 (summer highs zone).
Bear case: Break $29.5 opens $26–27; step aside and revisit.
Options overlay (optional)
For patient accumulation, consider cash-secured puts one to two tiers below spot (e.g., $32–33 area) to get paid while waiting. Or after a bounce into $40–42, consider covered calls to harvest vol. (No quotes here; just the framework.)
Sizing
Treat each add as ~1/3 of intended size. If bear case triggers, keep losses near 1–1.5% of total portfolio.
Catalysts
Regulation clarity on prediction markets and Illinois fee mechanics.
Seasonal outperformance during NFL/NBA peaks vs payout luck.
Continued mix-shift to iGaming and high-margin parlays.
Evidence of promo discipline driving sustained positive operating income.
Bottom line
The stock is bruised. The business isn’t. Your sheets show a company at $5.4B TTM revenue, ~49% gross margin, and half-a-billion in TTM free cash flow, with manageable net debt and improving seasonality-adjusted profitability. The market is punishing regulatory noise and new formats, but DKNG has the scale and balance sheet to adapt. At ~3–3.5x sales, you’re paying a fair multiple for a cash-producing growth asset with real competitive advantages.
Our stance: Accumulate on weakness into $33–36, respect $29.5 on a weekly basis, and look for a reversion toward $39–42 as the first checkpoint. If you need zero regulatory drama in your portfolio, skip it. If you can live with news-flow volatility and manage your levels, this pullback is buyable.
This analysis is for informational purposes only and should not be considered investment advice.