DraftKings CEO Jason Robins has expressed enthusiasm for prediction markets, yet the company's stock does not reflect this optimism. Following a ruling from the 9th U.S. Circuit Court of Appeals, which stated that sports-related event contracts on prediction markets are not swaps and thus not under the Commodity Futures Trading Commission's jurisdiction, DraftKings shares initially rose over 7%.
However, this uptick was short-lived, and the stock has seen a nearly 50% decline over the past year, with a 16% drop in the last month. Analysts, including Joel Shulman from EntrepreneurShares, believe the market's reaction is rational, as DraftKings' primary revenue source remains its sportsbook, not prediction markets.
Bernstein analyst Ian Moore noted that while investors have discounted the risks associated with prediction markets, they have not fully considered the potential opportunities, such as market making and access to states where sportsbooks are banned. Moore estimates that consumer volume for DKeX could reach $1 billion by December, representing about 9% of DraftKings' market capitalization.
The upcoming months will be critical for DKeX's performance, particularly with the football, basketball, and ice hockey seasons approaching. Bernstein maintains an outperform rating on DraftKings, with a price target of $29, suggesting a 32% upside from recent trading levels