DRAFTKINGS INC. (DKNG): what the price requires
At today's price, DRAFTKINGS INC. (DKNG) is priced for today's economics sustained for ~5.1 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DKNG
Headline
| Field | Value |
|---|---|
| Ticker | DKNG |
| Company | DRAFTKINGS INC. |
| Current price | $26.30/sh |
| Composition | Sportsbook 63% / iGaming 30% / Other 7% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | revenue-multiple |
| EV / sales paid | 2.4x |
| Steady-state operating margin assumed | 16.5% |
| Must persist for | 5.1y |
The company earns no operating profit yet; the inversion runs on the revenue multiple and an assumed steady-state margin.
Solve inputs: computed at a 12.3% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.6 years.
Reconcile: at the x-ray's 9.3% required return this reads ~6.7%/yr; the models below use their own rates.
How unusual the bet is: elevated (limited comparison data)
| Reference | Value |
|---|---|
| sustained it ~5.1 years at this level | 30% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 16.97x | 1 | expensive |
| Earnings | 3.49x | 3 | expensive |
| Relative | 7.78x | 3 | expensive |
| Growth | 0.69x | 3 | justifies |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.
Per-Model Detail (n=10)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $63.34 | 0.42x | yes | FCF base $0.8B, growth 25% (input: historical growth), terminal g 4.0%, WACC 8.8%, 7yr projection |
| DCF Exit Multiple | Growth | $38.23 | 0.69x | yes | Exit EV/EBITDA: 376.8x / 378.8x / 380.8x (bear / base = today's held flat / bull), 7yr |
| Relative Valuation | Relative | $2.53 | 10.40x | yes | P/E 30.8x (blended: static sector reference 14x + trailing (TTM) 229x), scenarios: 24.9x / 30.8x / 36.7x (bear / base = reference held flat / bull), EV/EBITDA 19.8x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $1.24 | 21.21x | yes | BV/sh $1.18, ROE (TTM) 9.7%, ke 9.3% (excluded from median) |
| Two-Stage Excess Return | Asset | $1.27 | 20.71x | yes | 5yr excess ROE then converge to ke=9.3% (excluded from median) |
| Discounted Future Market Cap | Growth | $33.89 | 0.78x | yes | Rev $6.3B, growth 25% (input: historical growth; tapered), Terminal P/S: 1.7x / 2.1x / 2.5x (bear / base = today's held flat / bull, cap 12x) |
| Peter Lynch Fair Value | Relative | $1.08 | 24.35x | yes | EPS $0.09, growth 1% (input: historical EPS growth), PEG=161.21 (Overvalued) (excluded from median) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $1.28 | 20.55x | yes | BV $1.18 + 5yr PV of (ROE (TTM) 9.7% − Kₑ 9.3%) × BV; BV grows 6.3%/yr (excluded from median) |
| Graham Number | Asset | $1.55 | 16.97x | yes | √(22.5 × EPS $0.09 × BVPS $1.18) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $0.01 | 2630.00x | yes | EBITDA $0.04B × sector EV/EBITDA 9.0x (excluded from median) |
| FCF Yield | Earnings | $14.44 | 1.82x | yes | FCF $713.6M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $7.54 | 3.49x | yes | SBC-adj FCF $0.39B (FCF $0.71B − SBC $0.33B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $2.90 | 9.07x | yes | EPS $0.09 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $0.07 | 375.71x | yes | BV $1.18 × (ROIC 0.5% / WACC 8.8%) (excluded from median) |
| P/Sales Sector | Relative | $24.64 | 1.07x | yes | Revenue $6.29B × sector P/S 2.0x |
| PEG Fair Value | Relative | $3.38 | 7.78x | yes | EPS $0.09 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $0.97 | 27.11x | yes | EPS $0.09 / required return 9.3% (Rf 4.3% + ERP 5.0%) (excluded from median) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $260.4m |
| Share count CAGR (dilution) | 5.6% |
| Burning cash | no |
Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.
Operating profit is negative or near zero and there is no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so interest coverage cannot be computed honestly.
Bullet Takeaways
At about $26 (as of June 27, 2026) the price is the kind only the growth methods can reach. Asset, earnings-power, and peer-multiple frames all read the stock as richly valued; the bet is on durable compounding that those static frames cannot price. The inversion implies roughly 21% revenue growth and operating margin widening toward the mid-teens from today's 0.6%.
The business has just crossed into GAAP profitability. First-quarter 2026 revenue rose 17% to $1.65 billion, net income was $21.1 million, and full-year guidance holds at $6.5 billion to $6.9 billion of revenue and $700 million to $900 million of adjusted EBITDA.
The balance sheet is in better shape than the loss-making years suggest, with about $999 million of liquid assets against $1.26 billion of gross debt and interest coverage near 3.1 times, but the price still requires the margin ramp to keep going, not just hold.
Bull Case
Start with the bear's strongest point, because it is the honest place to begin: almost every valuation method that does not assume future growth reads this stock as expensive. The asset-based models land near a dollar a share, the relative multiples imply a fraction of the price, and the earnings-power frame cannot even run because normalized operating profit is not yet covering the cost of capital. At about $26, only the growth-DCF reaches the price. So the question is not whether the static frames say overvalued. They do. The question is whether the data supports the growth they cannot see.
It increasingly does. First-quarter 2026 revenue rose 17% year over year to $1.646 billion, the company posted GAAP net income of $21.1 million, and adjusted EBITDA jumped 64% to $167.9 million, a figure management noted would have topped $200 million without the deliberate investment in Predictions and the Arkansas launch. That is the inflection a growth story has to show eventually: the top line still compounding while the operating loss turns into profit. Full-year guidance holds at $6.5 billion to $6.9 billion of revenue and $700 million to $900 million of adjusted EBITDA. The sportsbook footprint now covers 27 states and Washington, D.C., roughly 53% of the US population, and the company describes generating iGaming revenue through hold as users play against the house, an economics that scales with the player base rather than with headcount (DraftKings FY2025 10-K, accession 0001883685-26-000013).
The new leg is prediction markets. DraftKings launched its own exchange, DKeX, built on a CFTC license and technology acquired from Railbird, and its filings describe event-contract revenue earned from fees paid by futures commission merchants, recognized when customer trades occur, with the company not holding customer funds or assuming outcome risk (DraftKings FY2025 10-K, accession 0001883685-26-000013). Early volumes are large and growing fast, with roughly $3.4 billion in annualized consumer volume for the week ended June 21, up from $1.3 billion in May. The bull case is that the same customer base, brand, and technology stack that built a top-two sportsbook now extends into a second high-volume product, and that the implied 21% growth and margin ramp are exactly what a scaled two-sided platform can deliver. Analyst consensus, averaging a Buy with targets in the mid-$30s, reflects that durability premium.
Bear Case
Look first at how the capital structure interacts with the growth plan, because that is where a still-thin-margin business gets fragile. DraftKings carries about $1.26 billion of gross debt against $999 million of liquid assets, for net debt near $260 million, and trailing interest coverage of roughly 3.1 times resting on only $36 million of trailing operating income. The business is barely operating-profitable, yet it is funding a $200 million to $300 million spend on Predictions and ongoing state launches. As long as adjusted EBITDA scales as guided, the structure holds. But the price requires operating margin to climb from 0.6% toward the mid-teens, and a single soft year, an unfavorable run of sports outcomes that compresses hold, or a heavier promotional war would test a company that has only just reached GAAP breakeven. Its own filings describe litigation over the very promotions that drive customer acquisition, including risk-free and deposit-match offers (DraftKings FY2025 10-K, accession 0001883685-26-000013), a reminder that the customer-acquisition machine carries legal and regulatory friction.
The second fragile assumption is that the prediction-markets opportunity is DraftKings' to win. The filings frame the exchange as a fee business where the company does not execute trades, hold funds, or assume outcome risk (DraftKings FY2025 10-K, accession 0001883685-26-000013), which is attractive economics but also a market with native competitors who got there first. Kalshi and Polymarket never needed a sportsbook's infrastructure, and FanDuel has chosen to lean on CME rather than build its own exchange. If event contracts become the disruptive force some expect, they could erode the regulated sports-betting franchise even as DraftKings tries to ride them, and the heavy upfront spend may buy share in a market with thinner margins than the core book.
The third caution is the tax and regulation overhang that sits under all of it. Sports betting is taxed state by state, and rates have a way of rising once the activity is established, which directly compresses the hold margin the growth case depends on. Monthly unique payers actually fell 4% year over year to 4.2 million, partly from exiting the Texas lottery business, a reminder that the customer base is not a one-way line. The valuation leaves no cushion for any of this. With the conservative methods clustered far below the price and only the growth-DCF reaching it, the stock is priced for the plan working, and a stock priced for the plan is a stock that falls hard if the plan slips.
Valuation
At about $26 the price inverts to an embedded assumption of roughly 21% revenue growth a year with operating margin widening toward the mid-teens, against today's 0.6%. The solve runs on a revenue-multiple basis at a 12.2% cost of capital, and it is sensitive: each percentage point of cost of capital moves the implied growth by roughly 6.4 points, so the read is approximate. The priced-in pace sits within the range of what the company has recently delivered, with the stretch being how long that growth and the margin ramp must persist together.
The model X-ray shows an unusually wide split, which is the signature of a profitless-to-barely-profitable compounder. The asset-based methods land near a dollar to a dollar-fifty a share off a $1.18 book value and are excluded as reference floors. The relative methods sit far below the price because trailing earnings are minimal: the Graham number is about $1.55, EV/EBITDA at sector multiples collapses to near zero on tiny trailing EBITDA, and the price-to-sales method lands near $25, close to the price, because it values the large revenue line. The growth methods are the only ones that reach: the perpetual-growth DCF lands near $66 on a 25% growth input, the exit-multiple DCF near $39, and the future-market-cap projection near $34.
The pattern is the message. When asset, earnings, and peer frames all say richly valued and only forward growth reaches the price, the bet is explicitly on durable compounding that the static methods structurally cannot price. The stock is not cheap on anything the business has already earned; it is a wager that the revenue keeps compounding in the low-20s percent while margins climb into the mid-teens, and the recent swing to GAAP profitability is the first concrete evidence for that wager.
Catalysts
First-quarter 2026 results, reported June 1, were the key recent catalyst. Revenue rose 17% to $1.646 billion, the company posted GAAP net income of $21.1 million and $0.03 of diluted EPS, and adjusted EBITDA climbed 64% to $167.9 million, a figure management said would have exceeded $200 million without the Predictions and Arkansas investments. Full-year 2026 guidance was maintained at $6.5 billion to $6.9 billion of revenue and $700 million to $900 million of adjusted EBITDA. Monthly unique payers fell 4% to 4.2 million, mostly on the Texas lottery exit.
The defining forward catalyst is prediction markets. DraftKings launched DKeX, its proprietary exchange built on a CFTC license and technology from Railbird, integrated into its unified Sports and Casino app, with annualized consumer volume reaching roughly $3.4 billion for the week ended June 21, up from $1.3 billion in May. Management has earmarked $200 million to $300 million for Predictions marketing and technology. Citizens raised its target to $36 on the prediction-market opportunity, and the analyst consensus averages a Buy with targets in the mid-$30s. The watch items are the next quarterly print and whether adjusted EBITDA tracks toward the high end of guidance, prediction-market volumes and their margin profile, new state launches and any changes to state betting-tax rates, and the competitive response from FanDuel, Kalshi, and Polymarket.
Peer Cohorts (Per Segment, With Filing Citations)
Online gaming (Sportsbook & iGaming) - single reportable segment (reported)
- RSI (Rush Street Interactive, Inc.)
- (no filing in the citation store)
- CHDN (Churchill Downs Inc)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.