Bank of America Upgrades DraftKings to Buy on Strength of Prediction Market Projections

Bank of America upgraded DraftKings from Neutral to Buy, sending shares up about 5%. Analyst Julie Hoover held a $27 price target on the sports betting company, with the rating change driven by expectations for its prediction market business.

DraftKings entered prediction markets after acquiring Railbird Technologies Inc. and subsidiary Railbird Exchange in October of last year. The stock has fallen about 47% since that acquisition, according to reporting by GamblingNews.

Revenue Projections and Business Metrics

Hoover estimates DraftKings could generate around $40 million in prediction market fees in 2027 if the business remains viable, plus an additional $200-$400 million from market-making activities. The company reported more than 600,000 customers had used DraftKings Predictions by August. Annualized trading volume rose from $2.3 billion in April to $11 billion in July, split between $3.6 billion in consumer trading and $7.4 billion in market-making volume.

The bank cut its 2026 EBITDA forecast from $635 million to $500 million to account for higher costs of building the prediction market platform. It lifted the 2027 EBITDA estimate from $1.05 billion to $1.15 billion on anticipated gains from both the sportsbook and market-making.

Regulatory Risks and the Path Forward

Prediction markets function under a separate regulatory and tax framework from state-licensed sportsbooks. This structure has drawn criticism from certain state regulators and gaming interests who contend that sports-related event contracts closely resemble sports betting. DraftKings separately faces legal scrutiny in Massachusetts over allegations it deployed artificial intelligence to target gamblers with promotions.

The upgrade reflects a calculated bet that prediction market scale will offset near-term build costs and regulatory friction. Operators positioned with existing customer bases and trading infrastructure stand to benefit if federal and state classifications stabilize in their favor, but unresolved legal challenges could compress the addressable market and delay profitability.

Reporting: GamblingNews

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