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3 Reasons DraftKings Stock Is a Risky Bet or Hidden Gem
Posted On Oct 21, 2025 by Chris Markoch
American football season and gambling stocks usually go together like peanut butter and jelly. But that hasn't been the case for DraftKings Inc. (NASDAQ: DKNG). DraftKings stock is down more than 33% since the end of September and is trading near its 52-week low. However, analysts continue to be bullish on the stock, which suggests that it may be time for investors to make a bullish bet.
The American Gaming Association forecasted that Americans will wager approximately $30 billion on National Football League (NFL) games in 2025. That's an 8.5% increase from 2024. When you factor betting on college football, you can understand why this is a sector that's generating increased competition.
That competition isn't only coming from pure players like DraftKings. Casinos like MGM and Caesars have opened their own sports books to market in the last five years. There's also an emerging threat from companies like Robinhood, which is teaming up with Kalshi to offer football prediction markets.
That's where the story gets interesting, and tricky for investors in DraftKings stock. And the key word is investors. The sports betting market is getting crowded, but it represents a massive opportunity.
But that will take patience and time, two qualities that are usually in short supply with traders. However, while many traders are selling the news, DKNG stock could be an opportunity to buy when others are fearful.
Regulators Want DraftKings to Stay in Its Lane
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Recently, DraftKings has floated the idea of entering the prediction markets. These are platforms where users can bet on the outcome of non-sporting events. This became popular in the 2024 presidential election. It's a form of wagering that resembles financial derivatives or political futures.
However, DraftKings stock is down more than 33% as the Commodity Futures Trading Commission (CFTC) has raised concerns that entering such markets could constitute illegal off-exchange derivatives trading rather than "entertainment-based" betting.
This isn't the first time the CFTC has stepped in. They tried to block platforms like Kalshi from offering contracts on political outcomes. That started in 2022, but a federal appeals court has allowed these markets to continue for now, as evidenced by the 2024 election.
For its part, DraftKings is taking the stance that if Robinhood can move into its market, why shouldn't it be allowed to do the same thing? That's a quandary for investors to figure out.
This is a time when it's important for investors to stay focused on the big picture. Understandably, it's big news if DraftKings can expand into the prediction markets. Such a move would increase its addressable market and potentially increase the average amount that its current consumers wager on the platform.
At the same time, this is additional business. It's not as if regulators are cracking down on sports betting. Sports betting is legal in 39 states with Missouri to be added by the end of 2025. That still leaves 10 states – of which California and Texas are the biggest prizes and two of the staunches holdouts.
DraftKings Stock: Fundamentals Investors Can Bet On
First the bad news. DraftKings stock went public in 2019. Since then, the company is not profitable on an annual basis. But revenue continues to increase on a year-over-year (YoY) basis, and the company continues to see YoY growth in key metrics such as:
Sportsbook handle
Sportsbook revenue
Sportsbook net revenue margin
iGaming revenue
That's where the story gets more bullish. DraftKings is forecasting consistent profit starting in the fourth quarter of 2025. Analysts are projecting that earnings growth to be around 139% in the next 12 months.
That's not factored into the stock price right now. At around $33 per share on October 20, DKNG stock is trading 56% below the analysts' consensus price target. And even though many analysts have been lowering their price targets based on regulatory headwinds, the price targets are still significantly higher than the current price.
Plus, a key technical indicator points to DraftKings stock being oversold. The relative strength indicator (RSI) is around 34. That's in oversold territory, but higher than the 15 it registered in early October.
However, a more compelling reason to buy the dip on DraftKings stock can be seen in the activity of institutional investors. Although they only own about 37% of the stock's float, buying has outpaced selling nearly 2:1 in the past 12 months.
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