World Cup Boost Lifts DraftKings and Flutter Shares, but Prediction Markets Remain a Threat 

DraftKings and Flutter Entertainment shares have both moved higher in recent weeks, lifted by optimism around World Cup wagering. 

DraftKings stock climbed to $29 by the end of last week, marking a 42% gain from its low point this year. Flutter, which owns US sportsbook FanDuel, rose to $110 on Friday after touching a year-to-date low of $91. 

The gains come as analysts forecast record betting activity tied to the FIFA World Cup. A report from Eilers and Krejcik Gaming projects that Americans will wager $4.4 billion during the tournament, a sharp increase from the $1.8 billion wagered during the 2022 World Cup. 

While the projections are favorable for both companies, which lead the US sports betting market and are amongst the best sports betting sites, the rebound follows a stretch of slowing revenue growth. Even with recent gains, both stocks remain well below their previous highs. 

DraftKings has dropped 45% from its peak last February, when its valuation stood near $26 billion compared with roughly $14 billion now. Flutter has fallen 65% from its high point last year. 

The emerging issue that both companies are worried about is prediction market apps. Sites like Polymarket and Kalshi have been gaining popularity by diverting a considerable number of bets from conventional sportsbooks. 

A prediction market on Polymarket about the World Cup winner has received more than $2 billion in bets so far. Similarly, a Kalshi prediction market has $230 million in volume and is still growing. There were no prediction markets at all during the World Cup of 2022. 

DraftKings stock surges on strong prediction market growth 

The optimism surrounding DraftKings extends beyond World Cup projections. Shares jumped more than 11% last Tuesday, the company's largest single-day percentage gain in over three and a half years, after a SEC filing revealed strong early results from its predictions platform. 

According to the filing, annualized consumer trading volume on DraftKings Predictions rose 24% month over month to $1.3 billion in May. Total annualized trading volume increased 34% from April to $3.1 billion. The company noted these figures are preliminary and based on internal data. 

The jump comes after a tough stretch for DraftKings shares, which have been pressured by competition from prediction market platforms like Kalshi and Polymarket. Despite its growth, DraftKings remains far smaller than these rivals. Dune data shows Kalshi alone generated $10.4 billion in sports trading volume in May. 

Still, analysts see opportunity ahead. TD Cowen maintained a buy rating with a $30 price target, calling DraftKings its top small and mid-cap pick, and noted the company's core sports betting business is moving toward more durable profitability. UBS also kept its buy rating and raised its price target to $49.