BofA upgrades DraftKings to Buy with $27 price objective

Shares of DraftKings climbed 5% following an upgrade from Bank of America, which raised its rating on the sports betting giant from Neutral to Buy. Analyst Julie Hoover maintained a $27 price objective for the stock, signaling a potential 45% upside and calling the recent 47% year-over-year pullback an attractive entry point for investors.

A key factor in the upgrade is DraftKings' positioning in prediction markets, where Hoover noted the company is the third-largest player. If regulators approve the segment, Bank of America estimates it could generate roughly $400 million in fees by 2027, alongside $200 million to $400 million from market-making activities. Early fears of cannibalisation have not materialised, as traditional sportsbooks have outpaced prediction market growth since the football season started. If regulators shut the space down, Hoover argued that the terminal value overhang would lift, supporting a higher valuation multiple.

DraftKings' CEO recently confirmed at an industry conference that spending on prediction markets could be meaningfully higher than expected. Consequently, Bank of America lowered its 2026 EBITDA estimate from $625 million to $500 million, viewing the clarity as a de-risking event. For 2027, the bank raised its EBITDA forecast from $1.05 billion to $1.15 billion on core sportsbook performance and market making, suggesting the company could guide 2027 EBITDA between $1.0 billion and $1.2 billion.

The $27 price target reflects a 12x multiple of the bank's 2027 enterprise value to EBITDA projection. Looking to 2028 and beyond, Bank of America noted it wants to see stronger cost discipline in core operations to support cash flow and margins.