Multinational investment bank and financial services company Morgan Stanley has predicted second-quarter EBITDA of approximately $150 million for DraftKings. This is significantly below the sell-side consensus estimate of around $175 million, putting DraftKing’s price target down to $36 from $39.
Morgan Stanley Publishes a New Analysis on DraftKings
Published on July 22, the note covers eight gaming stocks and presents a mixed outlook for the sector. US regional casinos are expected to outperform, while Macau operators and online betting companies continue to face headwinds. Morgan Stanley maintained its overweight ratings on DraftKings, but expects the operator to narrow its full-year EBITDA guidance to $700 million-$800 million, from the previous range of $700 million-$900 million.
Around the same time last year, Morgan Stanley gave DraftKings a favorable prognosis as it expanded its footprint in the prediction markets field. However, beginning this year, the bank has slowly cut down the company’s target.
In May, Morgan Stanley trimmed its price target for DraftKings to $39 from $40 while reiterating its Overweight rating, implying approximately 60% upside from the stock‘s May 12 closing price of $24.61. The slight reduction reflects higher expected spending on prediction markets, which is likely to pressure near-term profitability.
The bank also lowered its 2026 adjusted EBITDA forecast to $767 million from $791 million, citing projected prediction-market marketing investments of $100 million in Q2 and $125 million in Q3. Despite the increased spending, Morgan Stanley raised its revenue projections to $6.94 billion for 2026 and $8.03 billion for 2027.
What Does Morgan Stanley Expect of DraftKings?
Fast forward two months, and Morgan Stanley once again lowered its price target by a further $3. It also forecasts that DraftKings will record EBITDA losses of approximately $290 million in 2026 and $40 million in 2027, before returning to profitability with an estimated $125 million EBITDA gain in 2028.
The new estimates come as the bank expanded its approach to modelling the prediction-market opportunity. It now incorporates parlays and combination trades alongside straight trades, while also accounting for both market-making activity and exchange fees. Morgan Stanley’s new predictions come as DraftKings experienced a surge in prediction market activities during the FIFA World Cup.
The revised Q2 EBITDA estimate of about $150 million implies a modest shortfall versus the previous expectations of around $175 million. This would be largely driven by increased customer acquisition investment in prediction markets and slightly weaker gross hold following the World Cup results.
In other news about DraftKings, the company merged its poker operations in Michigan, Pennsylvania, and New Jersey to strengthen its position in the region.