Cathie Wood Is Buying the Dip in DraftKings Stock. Should You?
Sports betting pioneer DraftKings (DKNG) is having a bit of a hard time on Wall Street, with DKNG stock down about 25% over the past month. Utilizing this dip, Cathie Wood’s investment machine, Ark Invest, has recently bought into the stock.
Ark Invest disclosed that it purchased a total of 511,049 shares of DKNG stock through its actively managed exchange-traded funds (ETFs). The investment underscores Wood’s preference for taking advantage of volatility and adding stocks to her portfolio when they are under pressure.
Should you follow Cathie Wood and invest in the DraftKings dip?
DraftKings is a prominent digital sports entertainment company that offers a variety of engaging experiences, including daily fantasy sports, sports betting, and online casino games. It combines advanced technology and data analytics to provide users with interactive platforms where they can compete in fantasy sports contests, place bets on live sporting events, and enjoy casino gaming.
DraftKings has expanded its services to create a unified ecosystem that connects sports enthusiasts with a range of dynamic gaming options. Based in Boston, Massachusetts, the company continues to lead the transformation of sports entertainment through its diverse and immersive offerings. It has a market capitalization of $16.2 billion.
Over the past 52 weeks, DKNG stock has declined by 14%, while it is down 12% year-to-date (YTD). The stock has been prone to swings this year, having reached a 52-week high of $53.61 back in February. However, DKNG is down 39% from that high. Conversely, the stock also reached a 52-week low of $29.64 in April, but it is currently up 10% from that mark.
DraftKings stock has been facing pressure from broader macroeconomic uncertainties. There have also been regulatory challenges, such as the imposition of a 50-cent fee on high-volume sportsbooks operated by big players like DraftKings in the state of Illinois.
The company is also facing an increasingly competitive market backdrop. On Sept. 30, DKNG stock took a tumble — dropping by 11.6% intraday — as investors were spooked by the performance of prediction platforms, including the emerging firm Kalshi.
DKNG stock is still trading at an eye-watering valuation compared to its industry peers. Its price-to-sales ratio of 3.6 times is considerably higher than the industry average.
DraftKings recorded better-than-expected topline growth for the second quarter of fiscal 2025. Revenue increased by 37% year-over-year (YOY) to a record $1.51 billion, surpassing the $1.43 billion that Wall Street analysts had expected.
The company’s sportsbook revenue increased by 45% annually to $997.87 million, while its iGaming revenue increased by nearly 23% from the prior-year period to $429.66 million.
DraftKings is experiencing growth in its payer count, with its monthly unique payer (MUP) count growing from 3.1 million in Q2 2024 to 3.3 million in Q2 2025. Additionally, its average revenue from MUP (ARMUP) increased from $117 to $151 over the same period. Adjusted EPS surged 73% YOY to $0.38. However, this did not meet the Wall Street analyst estimate of $0.41.
The company is expected to make some operational strides, especially during the ongoing NFL season. In August, DraftKings also gained a direct mobile sports betting license in Missouri, which enables it to operate independently without being affiliated with a land-based casino or professional sports team.
DraftKings reaffirmed its fiscal 2025 revenue forecast, which remains within a range of $6.2 billion to $6.4 billion. The company anticipates achieving revenue closer to the upper limit of this range, propelled by favorable sportsbook results and other strong revenue contributors.
Wall Street analysts are highly optimistic about DraftKings’ future earnings. They expect the company’s loss per share to narrow 75% YOY to $0.15 for the third quarter. For the current fiscal year, EPS is projected to surge 179% annually to $0.83, followed by 98% growth to $1.64 in fiscal 2026.
While Wall Street analysts remain significantly bullish on DraftKings, they have also adjusted their expectations. This month, BTIG analyst Clark Lampen maintained a “Buy” rating on DKNG stock while lowering the price target from $53 to $45. Citing a potentially challenging Q3 backdrop, analysts at Benchmark also decreased their price target from $53 to $43, while maintaining a “Buy” rating.
Likewise, Citigroup analyst Steven Sheeckutz maintained a “Buy” rating while lowering the price target from $58 to $56. Oppenheimer analyst Jed Kelly maintained an “Outperform” rating on DKNG as well, while decreasing the price target from $60 to $55.
DraftKings has come under the spotlight on Wall Street, with analysts awarding it a consensus “Strong Buy” rating overall. Of the 31 analysts rating the stock, a majority of 25 analysts rate it a “Strong Buy,” three analysts suggest a “Moderate Buy,” two analysts play it safe with a “Hold” rating, and one analyst has a “Strong Sell” rating. The consensus price target of $52.73 represents 61% potential upside from current levels. Meanwhile, the Street-high price target of $65 indicates almost 99% potential upside from current levels.
Despite rising competition and declining expectations, Wall Street analysts still maintain a bullish view of DKNG stock. With the NFL season underway, the company also stands to capitalize on heightened betting interest. Therefore, it might still be beneficial to follow Cathie Wood and buy into the DraftKings dip.
On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com