DraftKings and Flutter navigates volatile margins, state tax risks

Investing.com -- Bank of America downgraded both DraftKings and Flutter Entertainment to Neutral, citing renewed pressure from volatile betting margins, state tax risks, and uncertainty surrounding emerging prediction markets.

The brokerage said structural “hold” rates, a key driver of sportsbook profitability, have weakened again during the football season after stabilizing earlier in the year.

That volatility, combined with higher taxes and softer handle growth, has led BofA to trim long-term earnings forecasts for both companies.

For DraftKings, BofA said its U.S. iGaming share has slipped to 23% from 27% in two years, while tax and promotional costs continue to weigh on margins.

It cut its 2026 EBITDA estimate to $1 billion from $1.26 billion and lowered its price objective to $35 from $40, saying the company’s long-term earnings power now looks more constrained.

For Flutter, BofA said FanDuel remains more diversified but faces similar risks. Handle growth has slowed to about 5% year-to-date, and UK tax harmonization could add further pressure alongside U.S. state-level tax increases.

The brokerage reduced its 2026 EBITDA forecast to $3.66 billion from $4.24 billion and its price target to $250 from $325.

BofA said both stocks are likely to move together in the near term as operators face a “perfect storm” of regulatory, tax and competitive pressures that could spark a renewed marketing and pricing battle in the U.S. sports betting market.

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